During its August 9 meeting, the Board of Economic Development greenlit the Governor’s Office of Economic Development’s plan to offer up to $100,000 for some private consultant to come study whether the market would support new small and midsized meatpacking operations in South Dakota. The request for proposals (in the BED meeting agenda packet) tells bidders they should to study these market factors:
- available cattle supply
- sales and marketing, both on the procurement and finished product side
- processing economics, both direct and overhead costs
- a reasonable capital stack—i.e., debt-to-equity ratio at startup
- costs associated with rural construction and rural residual values of MPP facilities [MPP usually stands for Meat and Poultry Products, but this RFP mentions only meat and pork, not poultry]
- the small packing industry as it exists today in SD
- true workforce availability
But watch out, newly appointed GOED chief Chris Schilken. The last time the state invested in meatpacking, with Korean and Chinese investors buying green cards to fund a state-subsidized beef plant in Aberdeen, the project shut down and went bankrupt, and the former economic development chief who pushed the project ended up dead. Bob Mercer summarizes the EB-5/Northern Beef Packers fiasco:
South Dakota state government became deeply snarled in efforts to open a beef plant in Aberdeen that began during the mid-2000s, when U.S. Senator Mike Rounds served as governor and Richard Benda was state commissioner of tourism and development.
Foreign investors put money into the project, known as Northern Beef Packers, through the federal EB-5 program, and some of them later sued. The company filed for bankruptcy, Benda died in 2013 by what was officially ruled a shotgun suicide, and Joop Bollen of Aberdeen in 2016 pleaded guilty to a Class 6 felony for his role and was sentenced to two years of probation and a fine. The resurrected plant now operates as DemKota Ranch Beef [Bob Mercer, “GOED Seeks Meatpacking Study,” KELO-TV, 2023.08.15].
The USDA defines “small” meatpackers as those with fewer than 500 employees. Demkota thus qualifies as a small packer. GOED’s study of the small packing industry as it exists today in South Dakota will thus need to look closely at Demkota and perhaps talk about why it initially failed in its state-subsidized and EB-5-visa-backed form, how Demkota has managed to steer clear of such failure, and how the state can avoid stepping in cowpies in any future promotion of meatpacking… if the study finds the market can bear any more small slaughterhouses.
GOED is taking bids until September 8. They expect to award the contract by October 11 and get study results by the end of this fiscal year, June 30, 2024.