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Financing

USDA takes aim at supply-chain bottlenecks

A financing initiative aims to improve the volume and price of food supplies by fostering loans of startup and growth capital.
supply chain
Photograph: Shutterstock

A federal program aimed at bringing down the wholesale prices of meat and poultry is having the spillover effect of fostering more channels for getting all sorts of supplies to restaurants.

The Food Supply Chain Guaranteed Loan Program was created by the U.S. Department of Agriculture (USDA) at the end of 2021 as part of the Biden administration’s multifaceted effort to modernize the nation’s networks for producing and distributing food supplies.  

Funded with $100 million in infrastructure investment dollars from the American Rescue Plan Act, the initiative was aimed at the middle portion of the food pipeline—the processing plants and distribution networks situated between producers and retail food sellers, including restaurants.

The financing was earmarked for guaranteeing up to $100 billion in loans by private-sector institutions to those middle links of the supply chain. The hope was that the loans would be used to fund startups and the expansion of companies currently vying in that space. With more product flowing through the supply network, shortages were expected to become rarer, and the heightened competition held the promise of tempering prices.

The White House aired its hopes that the program and related efforts would foster the creation of more protein processors. President Biden has repeatedly lamented in speeches that virtually the nation’s whole domestic supply of meat and poultry is handled by just four processors, keeping prices high. He even lamented the situation in his State of the Union address.

But the USDA’s guaranteed loan program is channeling capital beyond the meat industry. On Tuesday, for instance, a new breed of retail and foodservice distributor announced that it’d been tentatively approved for about $8 million in USDA-backed financing. Innovative Food Holdings said the expected loan will enable it to refinance and thereby expand its access to growth capita going forward.

The company is one of many e-commerce supply options now available to restaurants. It specializes in artisan and small-batch supplies that are shipped directly to chefs.

Consumers can also shop its wares.

It is not known how many other alternative sources of restaurant supplies have been started or expanded through the USDA’s funding initiative.

The availability of financing comes as restaurants are facing historic increases in food costs. Wholesale flour prices, for instance, are forecast by USDA to rise by 15% this year, largely because ofsupply disruptions caused by Russia’s invasion of Ukraine.

The wholesale price of chicken is projected by USDA to rise by as much as 12% this year, after soaring 26.5% in 2021.

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