In anticipation of a recently revised-June 26 Food and Drug Administration regulation prohibiting certain cattle materials in animal feed, some in the rendering industry have taken steps to limit their potential liability by refusing to pick up undocumented materials. Others are requiring small slaughter operations to obtain separate liability insurance coverage.

Indeed, most renderers are refusing to pick up Specified Risk Materials (SRMs) from the processors, even when they are separated, leaving processors to find disposal alternatives.

The net effect of this policy is that smaller kill plants, particularly those doing custom slaughter for farmers and ranchers, are facing a financial quagmire that may force them to surcharge their customers or absorb significant new overhead charges. Some may be forced to give up custom work, a step that would threaten the future of dairy farmers or the entire genré of small livestock farmers up to 100 miles from the nearest plant.

For the rendering industry, whose finished materials may end up in animal feeds, the concern is clear: they could face disastrous recall costs if anything they produce contaminates consuming herds. The issue is primarily bovine spongiform encephalopathy, which is caused by an errant prion that may not be killed by normal rendering temperatures.

In 2004, USDA’s Animal and Plant Health Inspection Service introduced its enhanced BSE Surveillance Plan, which included sampling at slaughter establishments to look for such materials. The FDA declared bovine tissue thought to contain BSE should not be used in animal feeds. Thus, whether afraid of potential federal prosecution or customer recalls, the rendering industry smelled the potential liability.

In effect, the renderers asked for materials to be tested by kill plants and found negative for BSE. Some said plants would have to sign a release in which they assumed any costs for liability, which could include recalls, plant clean-up costs, legal fees or other related expenses.

Large slaughter plants that operate their own rendering facilities kill younger cattle and don’t take in outside materials to render. But the independent renderers sought ways to share their potential liability with the smaller plants that supplied their raw materials.

The National Renderers Association, which represents 51 member-rendering companies operating 205 facilities in the U.S. and Canada, alerted its members about the potential liability, but affirmed that actual policies followed had to be individual company decisions.

The June 26 rule means brains and spinal columns from animals more than 30 months of age won’t be picked up from small plants by independent renderers. The same goes for uninspected cattle carcasses (unless shown to be under 30 months of age) if the brain and spinal cord are not removed and disposed of by the plant or the animal’s owner. Ironically, FDA and USDA have different lists of SRMs.

Seeking disposal methods

Smaller slaughter plants are left to find other methods of disposing of those SRMs. As a result of the new rule, independent rendering companies will not accept downer animals or deadstock not documented to be under 30 months of age.

"Small slaughter-plant operators will have to dispose of those materials by landfilling, composting or incineration," says Jay Wenther, executive director of the American Association of Meat Processors. "The [June 26] deadline has meant that the renderers have already started to implement their new policies and a large number of slaughter plants have had to turn to local landfills. Quite a few plants had problems with landfills accepting them. Landfill officials and local authorities visualized maybe 30 or more cattle carcasses coming to them and were opposed.

"When the plants informed them that only brains and spinal columns would be removed from cattle 30 months of age or older, some relented and began accepting them," Wenther continues. "Another option is to denature the SRMs and return them to the animal’s owner for disposal. This has been confirmed by the Food Safety & Inspection Service."

Composting is another alternative, Wenther says, but this is often more regulated in terms of permits, sealed container and transportation requirements and red tape in many jurisdictions.

Incineration is another disposal alternative for SRMs. Emily Berg of Dalhart Processing, Dalhart, Texas, says their small family meat plant put a crematory system on-line in mid-March.

"We researched it and found a system for about $19,000 that should solve our problem," Berg advises. "We are in town and opted for a system with an afterburner and stack, putting us in full Environmental Protection Agency compliance."

Berg says the unit is about 8’x9’ and will be used three times a week at a cost of about $400 a month using natural gas.

"We cannot burn municipal waste but could take in materials from veterinarians, hunters and even road kill to offset some of our costs, as long as we keep a log on what we are accepting" she continued. "It took about six weeks to get the necessary permits from Texas agencies and town officials.

"When our rendering company initially asked for a $2 million liability (per occurrence) coverage and $5 million aggregate, the costs could have been as much as $1,200 a month. They [an independent rendering company] were picking up three times a month at a cost to us of $700 monthly."

She says the system burns material at 1,800° F and reduces 1,500 lbs. of ingoing material to 15 lbs. of sterile white ash, which can be put in fields, flower what the renderer did not pick up, who knows what could have leached into the water table where our children live. I feel good about our decision."

Dalhart processes about 15 cattle and 15 hogs per week, but estimates it produces nearly a quarter-million lbs. of materials a year that previously went to the renderer.

"I feel that what we have done is much more socially responsible since the renderer would still not pick up SRMs or similar materials from other species including deer and elk, goats and sheep," Berg adds. "If we landfilled

Of further concern to smaller kill plants is the fact that there is often only one rendering firm serving a region. They are able to dictate price and terms without fear of losing the business to any other competitors.

Added expense

Valley Proteins Inc./Carolina Byproducts, which operates rendering service in 11 Mid-Atlantic states and three others in the Southwest, advised its suppliers that they would need to provide $1 million in liability insurance coverage (per occurrence), which will cost some small kill plants about $1,500 a year in additional premiums. Some custom slaughterers have already begun surcharging individual customers or will begin doing so later this month.

Over the past 15 years, small slaughter plants have seen service for rendering go from being an income producer, particularly for fats, bones and hides that were picked up, to one of a pay-for-service expense. Most independent renderers now charge significant amounts to pick up the materials and have drastically reduced the prices they pay for hides, citing declining markets for bone meal, fats and hides. In recent years, they imposed fuel surcharges on their suppliers.

Disposal costs for now-worthless downer cattle have compounded the situation and often put custom-plant operators in a situation where they have to face off with their customers over who is responsible for disposing of a downer animal, let alone who is liable for the loss of value of that animal.

Smaller livestock producers may pay $100 or more for disposal of dead animals, depending on their distance from an independent renderer, or turn to burying the carcasses in fields.

AAMP and other associations requested and received a 60-day extension of the April 27 effective date. However, Wenther says even the extension won’t address the needed time to educate landfill operators that the SRMs are not "hazardous materials" as some believe.

Wenther wrote to FDA’s compliance division explaining although FDA does not regulate the meat industry, ramifications of the new regulation could have devastating results for small meat plants, perhaps forcing many to close or give up custom slaughter of animals over 30 months of age or older. He told the agency it could not avoid the issue by claiming it only regulates the rendering industry in such matters.

Valley Proteins President Gerald Smith indicated that the new regulation can only be monitored through written documentation or direct observation.

"We know well that there are no laboratory tests that can prove the presence or absence of Cattle Materials Prohibited in Animal Feed [CMPAF] in our finished protein products," he explained. "It is for this reason that we believe a recall will only occur if FDA has substantiated visual confirmation that CMPAF has been transferred to us for rendering by a specific supplier.

"Therefore, we think it unlikely that we will need to track back to determine the supplier which has transferred CMPAF to us since FDA’s direct observation will be its basis for forcing a recall. Our estimated cost of any recall is in excess of $1 million due not only to our direct cost of retrieving and disposing of the protein, but also due to our expected loss of future sales," Smith stated.

The coming regulation could have extreme consequences for the dairy industry, which is facing sharp declines in milk prices, a factor that could result in liquidation of money-losing dairy herds.And, ironically, China, which has been sharply criticized for the lack of safety in its foods and consumer goods shipped to the U.S., has added fuel to the fire by attacking the American rendering industry.

The Chinese say U.S. renderers export billions of pounds of animal feed that is unfit for animal consumption to Asia and Latin America because it can’t be sold in this country.

Thus, efforts to override the April 27 effective date for the FDA regulation are likely to take a smaller role on the world economic stage.

Steve Krut, an industry veteran, is a contributing editor writing exclusively for MEAT&POULTRY, specializing in small business issues. He resides in Marietta, Pa.