Lucan, Minn. – Small business owner Karen Fennern’s approach to managing expenses is simple: “Anything that costs me less or makes me money is a benefit.”

As a meat locker owner in a small southwest Minnesota town, Fennern runs a tight ship, paying attention to every revenue source and expense. Last year business was good – she custom processed about 300 cattle and hogs in her state-inspected plant.

But because her plant is small, she can’t capture some of the extra byproduct revenue that larger plants enjoy.

Fennern disposes of her plant’s offal – bones, fat, organs, blood – that can be valuable if sold to renderers and pet food companies. At one time she could sell the bones and tallow, but now companies want bulk supplies. Only her beef hides are marketable, but she gets cleaning charges for the paunches, which offsets some of the profit. Hundreds of other processors like Fennern receive nothing for their offal.

To increase small- and medium-size processors competitiveness, the USDA Federal State Marketing Improvement Program (FSMIP) has funded an effort by Minnesota, Iowa and Wisconsin to help businesses tap into coproduct markets.

Typically, 60 percent of an animal’s live weight ends up as commercial meat cuts. The remaining 40 percent is coproducts. Individually, small-scale processors don’t have enough offal to interest buyers, but collectively they might.

“There is a large market in the pet food industry for organ meat, plus there are markets for pork and beef hides,” says Dennis Timmerman, AURI project development director. “We’re working to match the needs of pet-food producers with the needs of meat processors.”

Timmerman and AURI are researching offal markets to determine the quality and quantity needed by Minnesota manufacturers. Then they will determine what the state’s meat processors have available and how they could collectively meet offal market demands.

Similar efforts are taking place in Iowa and Wisconsin. The three-state FSMIP project includes product development assistance, which AURI is providing for Minnesota.

According to the Minnesota Association of Meat Processors, the state has about 500 small processors, which often connect local livestock producers to consumers. The facilities provide farmers with a facility for slaughtering animals for personal use or to sell to other local residents.

“A lot of small livestock producers market their livestock through these processors,” Timmerman says. “The processors’ success can affect the producers’ bottom line.”

In Minnesota, direct meat sales totaled more than $41 million in 2001, according to a Minnesota Department of Agriculture survey. Since then, sales have likely grown as more producers are direct-marketing traditional or value-added meat products.

For locker plants, such as Fennern’s Lucan Locker, anything that adds to the bottom line is a welcome change. Years ago, when she worked for another meat processor, “our rendering check used to pay the electric bill. It was an extra $100 or more a month, and when you’re running freezers, coolers and a retail case, it’s not a small deal.”

Timmerman hopes to have market and processor information gathered later this summer and begin outreach efforts late fall.