As the lackluster economy continues to challenge the horse industry, ranchers, lawmakers, and horse owners gathered at the Summit of the Horse in Las Vegas, Nev., this week to discuss the economic state of the industry and the unwanted horse issue. One of the topics drawing much attention to the summit was ways to re-establish the horse processing industry in the United States. But the path to making processing plants profitable for investors is complicated, economic experts say.
The U.S. horse processing industry began to decline in 2005 when Congress stripped the USDA of funding for food safety inspections at the plants. The USDA continued to offer inspections on a fee basis until 2007 when a federal judge ruled against the inspection for fee arrangement, effectively forcing the remaining U.S. plants to close.
The decision eliminated the processing option just before the economic recession sent horse-keeping costs soaring. In response, some members of the horse industry sought to reinstate horse processing in the U.S., which they believe would help decrease the number of unwanted horses. Despite potent opposition from animal rights advocates, legislation promoting private sector processing plant development was introduced in a few states in 2009 with mixed results. Processing plant development legislation became law in Montana and Wyoming in 2009, and lawmakers in other states remain committed to passing similar legislation.
Economic development consultant Bill Fredrick, president of the consulting firm Wadley-Donovan Growth Tech Economic & Workforce Development, is not surprised. Given recession-generated job and tax-revenue losses, horse processing plant development can have appeal especially in states west of the Mississippi River.
"People in the Western states and in the upper Midwest tend to be more realistic about things (involving livestock)," said Fredrick. "Also, in areas where unemployment is high, the plants could be pitched as creating jobs for Americans and developing an underutilized resource."
However, it takes more than processing-friendly legislation to lure serious plant developers. Along with the political will, communities must also have the infrastructure necessary to support plant operations, Fredrick said.
"In order for a plant to be developed, it needs workforce and the sewage and water infrastructure necessary to support it," he said. "Places where cattle processing plants already exist are good location choices."
Plant success also is contingent on product safety inspection availability. Wyoming's law avoids the predicament by limiting meat distribution to within its borders and allowing state officials to inspect the products. But the market limitation could discourage serious investors, Fredrick said.
"In states where there is a small population, you just don't have much of a market, and Americans don't generally consume horsemeat," he said. "So to attract investors, it would have to be an export business, and then the inspection complication arises again."
But foreign market demand for animal protein products including horsemeat, is on the rise in Asia, Eastern Europe, and other developing economies where per capita incomes are growing and cultural opposition to horsemeat consumption is scant or nonexistent, said Jim Robb, director of the Livestock Marketing Information Center in Colorado.
Even if producers can overcome inspection and operations obstacles, exporting food products is a complicated and time-consuming business. To be successful, exporters must identify marketing channels and cultivate relationships with offshore clients, and cope with export restrictions periodically imposed by foreign governments, Robb said.
Meanwhile, Washington State University agricultural economist Shannon Neibergs, PhD, said plant promoters must be mindful of investor concerns over financial market fluctuations. The U.S. dollar's current value below the Japanese yen and the European euro makes U.S. products affordable for foreign consumers. But the same products become more costly when U.S. currency value rises. The changes are directly connected to plant profits, Neibergs said.
"Plant investors will be looking at the payback period," he said. "They'll have to evaluate profitability over the long term."
Despite the passage of processing-friendly legislation, horse processing plants have yet to open in Montana and Wyoming. Even if they do, Neibergs does not believe processing is the sole remedy for the equine industry's economic woes.
"There many variables," Neibergs said. "The economy isn't going to turn around overnight."
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