'Zillions of Questions'
Before deciding on building in-house rendering plants, packers need the right answers
Meatpackers thinking about establishing in-house rendering operations had better be prepared. There are several questions they must answer.
How many is several? Two, three, four?
"There are a zillion questions to answer because there are no fixed rules as to whether [packers] should start their own rendering operations," an executive from a rendering machinery operation notes. "It all boils down to economics."
Perhaps "a zillion" is stretching the point, but the fact of the matter is beginning a rendering operation is no simple task. There are numerous issues, many of which may never occur to packers.
Of course, the most important question is: Can a rendering facility be profitable for packers?
If a rendering plant is deemed to be profitable, it can carry a packer through the peaks and valleys of normal business cycles.
"The profits are there to be made by taking waste and turning it into money," one rendering manufacturer stresses. "But [packers] have to be smart."
The first question is: Can packers afford to build a rendering operation, and will there be a quick payback on their investment?
A chicken processor in the south central United States is about to open its own rendering facility. But the total cost from the ground up is $50 million.
While there are many factors involved in the debate surrounding in-house rendering facilities, one rendering manufacturer puts the price tag between $2 million and $20 million, depending on the size of the plant.
But before getting to the question of profitability, other questions and issues must be answered and addressed. Among them:
-- How many pounds of raw material are produced each day?
-- Raw material yields and projected operating costs must be analyzed.
-- The value of the protein and fat produced must be analyzed, and compared to the cost to produce-labor and maintenance-those by-products.
-- Is there a building available, and is that building attached to the rest of the plant? Or will a new building have to be constructed?
-- How will a rendering operation affect a plant's wastewater treatment system? Because rendering will release more effluent into the system, a new permit might be needed.
-- Does a plant have enough product storage space to handle by-products, or will packers have to construct a new storage area?
-- How long does a packer want to run the rendering plant? In many cases, according to a rendering manufacturing executive, packers want to run the plant as long as they run the kill and cut operation. Usually, packers want to run the operation in two shifts.
-- How close is the rendering facility to the market a packer wants to serve?
"These are simple questions," the rendering official stresses. "But you would be surprised that people did not even think about these questions.
"They have a certain dollar figure budgeted for a rendering operation, and then they find out it is not even close," he adds. "Then they have to decide if they want to find more money or build a rendering plant for the money they budgeted, which won't be top of the line."
A complicated decision
Some packers believe that because they have a slaughtering operation, they can automatically run a rendering operation, one rendering equipment manufacturer points out.
"What it ultimately comes down to is whether a packer can make a profit from a rendering operation," he notes.
When talking about costs, equipment will be No. 1, especially odor control equipment, as well as processing and water treatment equipment.
Another aspect of establishing a rendering operation that packers need to remember: exasperation from seeking permits to operate the facility.
"People underestimate the time it takes to get permits-and they underestimate the aggravation it could cause," a rendering equipment manufacturer contends.
Part of the aggravation, he believes, comes from the fact that a packer could be dealing with up to four governmental organizations-city, county, state and federal. And on top of everything else, processors must also deal with the rendering industry's dubious past.
"Let's face it: Rendering plants never have had the greatest reputations for odor control," a rendering systems manufacturer notes. "We have made great strides in the past few years, but for many people, the image remains. You are carrying 50 years of reputation on your back."