Alaska livestock producers look to privatize struggling state-run slaughterhouse

PALMER -- With state funding next year in question, Alaska livestock producers are trying something new in the decades-long bid to privatize Mt. McKinley Meat and Sausage Co.

The inmate-staffed slaughterhouse in Palmer, acquired from a failed private company in the 1980s, usually runs in the red, and the state has tried unsuccessfully for years to lease or sell the operation.

The Alaska Board of Agriculture and Conservation on Thursday unanimously backed a proposal to use an Oregon-based group called the Niche Meat Processor Assistance Network to conduct a financial evaluation of the slaughterhouse.

The network is working with the Alaska Farm Bureau in what supporters describe as just a first pass at determining the viability of putting the slaughterhouse in private hands.

Mt. McKinley occupies a crucial role in Alaska's small livestock industry: It's the only U.S. Department of Agriculture-certified facility in Southcentral. Any producer making commercial sales needs a stamp from Mt. McKinley Meats. Supporters of keeping the plant open say it benefits not only livestock producers but farmers growing grain and hay.

The facility slaughtered 950 animals in 2013 and around 1,500 last year, according to Franci Havemeister, director of the Alaska Division of Agriculture.

Producers say the plant needs to be privatized, and removed from the vagaries of legislative funding decisions, before Alaska's livestock industry can grow.

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"This is one thing that's preventing a herd from being built here is the year-to-year attacks from the Legislature that they want to shut it down or quit spending money on it when they're not spending money on it anyway," Delta Junction's Scott Mugrage said by teleconference during a meeting Thursday. Mugrage, a Farm Bureau member, chairs the new committee. He brings his animals 300-plus miles to the Palmer slaughterhouse.

The Farm Bureau and livestock producers decided to support the analysis after members of the Legislature forward-funded the plant for just one more year, said Todd Pettit, who raises bison at his Lazy Mountain ranch but doesn't currently use the slaughterhouse. He doesn't sell commercially because he sells direct to consumers, but used to raise cattle and used the plant then.

Pettit said he's working with the state agriculture board on the financial study because he can be more objective, though he said he supports the slaughterhouse's continued operation because it's good for the meat industry in general.

The bureau started what's called the Red Meat Committee to represent producers' interests in the future of the plant.

"We're very concerned about that because it's the only USDA slaughter plant we have in Southcentral," Pettit said. "If they cut the funding on it, then we don't have anyplace to bring animals to get a USDA stamp on."

The Oregon group is a national network and information hub for small meat and poultry processors, as well as farmers and buyers. Two subcontractors with the network will tour the plant late this month or in early August. Along with the physical operation, they'll evaluate financial records as well as livestock processing records and meat sales. Their findings will be shared with stakeholders representing the state, Farm Bureau and producers.

It's expected the network will be able to say where the plant is losing money and whether it's financially viable for private operators.

The network and contractors are providing consulting services for free, according to a proposal submitted to the agriculture board. The Farm Bureau will pay half the travel costs of one subcontractor, including $600 to $800 in airfare and $300 per diem rate.

It's likely a group of producers or a co-op would be required to operate the slaughterhouse, producers say.

The state's goal all along has been transferring the plant to private hands, Havemeister said.

Despite complaints from legislators that the slaughterhouse bleeds millions of dollars a year, Havemeister said the plant actually made a $42,000 profit during the last fiscal year. On average, however, it loses $100,000 a year, she said. That money comes out of the Agricultural Revolving Loan Fund and not the state's general fund. Asked about the recent profit, Havemeister credited a "vanload of hides" that netted about $40,000, plus more sales to Goose Creek Correctional Center.

It's not clear how some of the plant's current operations will adapt to private hands given the emphasis on state corrections contracts and prisoner labor.

Zaz Hollander

Zaz Hollander is a veteran journalist based in the Mat-Su and is currently an ADN local news editor and reporter. She covers breaking news, the Mat-Su region, aviation and general assignments. Contact her at zhollander@adn.com.

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