Access to cold storage space is critical for the distribution of meat products worldwide. For meat processors, cold storage space is necessary to maintain quality, extend shelf life, and ensure food safety.
In 2021, the Agricultural Utilization Research Institute (AURI) and the United States Department of Agriculture, Agricultural Marketing Service (USDA-AMS) signed a multi-year cooperative agreement focused on the Upper Midwest’s small meat and poultry processors. Among the goals of the project was to study financial barriers facing small meat processors and to develop solutions to help the industry overcome challenges that emerged during the COVID-19 pandemic. One of the issues that emerged from the study phase of this cooperative agreement was the dearth of cold storage space in the Upper Midwest.
For independent meat processors in the Upper Midwest, however, finding space in nearby cold storage facilities for their products is a constant challenge. Most cold storage space is located in large, metropolitan areas in the southeast and southwest regions of the United States. The cold storage facilities that do exist in the five-state area (Iowa, Minnesota, North Dakota, South Dakota, and Wisconsin) serve larger national processors. These factors can lead to higher prices and postharvest losses for local and regional meat processors. Further, building new cold storage space is a tremendous expense and not enough capital investment is occurring on the public and private side to increase capacity.
To diagnose and understand the nuances and specifics of the region’s lack of cold storage, AURI hired Axiom, a market research firm, to examine cold storage demand and bottlenecks in the five-state region. The recently published report, Upper Midwest and Northern Minnesota Cold Storage Assessment Report: Empowering Local and Regional Meat Processing in the Upper Midwest Region, is available at AURI.org.
The goals for the project were threefold:
Validate the market need for additional cold storage in Iowa, Minnesota, North Dakota, South Dakota, and Wisconsin.
Estimate the amount of existing commercial freezer space in the five-state region.
Identify the need for additional cold storage in the next five to seven years.
Based on statistics from the U.S. Department of Agriculture, there are 158 cold storage facilities, with 641 million cubic feet of capacity, in Iowa, Minnesota, North Dakota, South Dakota, and Wisconsin. This represents about 11% of the total cold storage capacity in the United States. The cold storage capacity is not spread evenly across the five states. Wisconsin has 92 cold storage facilities with more than 365 million cubic feet of storage while North Dakota only has three facilities with 7.8 million cubic feet of storage.
Mike Reiber, the CEO of Axiom and lead author of the report, says the study confirms that the Upper Midwest is woefully short of cold storage space. The study illustrates “cold storage deserts” exist across significant portions of the region for meat processors, explains Reiber. He says that the report crystallizes the negative impact the lack of cold storage facilities has on small rural communities.
For processors, the lack of available space hinders business growth and leads to increased costs. During busy times of the year, like the holidays, hunting season, and summer grilling season, cold storage space is even harder to find, so businesses are forced to cut back on the number of animals they process, which further limits revenue and the seasonal variety of meat available to consumers.
These factors further disrupt the supply chain for meat and poultry and, ultimately, impact grocery store prices. For business owners, this means increased operating costs and more headaches, notes Clay Newton, AURI’s meat innovation specialist.
“Many of the so-called ‘mom and pop’ processors that are making thousands of pounds of products simply don’t have anywhere to store it or freeze it or cool it,” says Newton. “Their onsite lockers simply cannot handle the volume. Compounding the problem, the majority of operations either do not have access to off-site cold storage and/or do not have the financial or logistical means [refrigerated transport or manpower] to take advantage of off-site storage when a facility is nearby.”
In addition to the challenges facing the processing industry, the report highlighted several important next steps, including:
Catalog the support mechanisms for smaller processors that are not interested in using commercial cold storage yet experience on-site capacity constraints. Define the municipalities outside the areas of high cold storage penetration within the five-state region with the greatestdemand and potential for developing cold storage capacity. Increase the understanding of high-volume independent processors serving diverse market channels as they are most likely candidates for commercial cold storage use. Identify cold storage consultants with experience developing successful shared cold storage facilities to advise the meat and poultry industry. Investigate regional and local electric utility rate plans and energy efficiency rebate structures. Identify private investors that are actively pursuing cold storage projects and development.
The report further underscores what many in the processing industry have known for a long time. Addressing the problem will require the cooperation and forward-thinking of many stakeholders. One way that AURI can help is by providing technical expertise and guidance to businesses applying for government grants to build new cold storage facilities or expand and update existing ones.
Newton says the entire processing supply chain needs to address the issue in a timely manner. Many of the existing cold storage facilities in the Upper Midwest need modernization, and business owners say finding replacement parts is a big challenge.
Reiber acknowledges the solution to the problem is simple to identify but more difficult to address. The entire region, but especially the rural areas, needs more cold storage space, but economic factors are impeding the development of more capacity.
“The fact is that one isn’t going to build [new cold storage facilities] in these areas because there aren’t enough people that live there and it is a tremendous expense,” he says.
Reiber acknowledges the answer is a combination of seed grant money from state and local government and forward-looking, community-focused entrepreneurs. During the research, Reiber spoke with a business owner from South Dakota who recently used a small government subsidy to add additional cold storage space to his 250,000-square-foot processing center. The private market would not lend the business owner money for the project.
“The reality is that in order to build more cold storage in these rural areas, there needs to be investment from local, state, or federal governments through seed money or tax incentives,” Reiber explains.
Reiber stresses that there is a way to address the overarching issue and build additional cold storage capacity in the region. In his interviews and research for the report, Reiber says he identified a model that can be used on a larger scale. He found examples of groups of ranchers and microprocessors in the western plains states that have banded together to create a modular plant that processes, wraps, and freezes meat all on-site. By working together and pooling their resources they have been able to address a common challenge.
“The logistics companies understand that there is not enough cold storage space, but they don’t see the return on the investment they need to invest in these cold storage deserts yet,” Reiber notes. “There are enterprising people that are working to figure out how to use their own money and get the capital they need from the government and banks to expand and build new facilities. They will figure this out because they need to, however they are the outliers. To be successful in addressing this issue, you need someone with some money and some vision. Luckily, those people are out there working on this issue.”
