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Report: Tri-Cities is food processing mecca

A New Jersey consultant who helps corporations such as PepsiCo choose sites for processing plants has confirmed what Tri-Citians already suspect: This is a good place to process food.

How good?

The Tri-Cities is the fourth lowest-cost region in North America to package food, according to a private report by The Boyd Company, a Princeton, N.J.-real estate consultant that works with companies to identify sites for new facilities.

Boyd compared the cost to operate a hypothetical 300,000-square-foot plant with 500 employees in 24 cities that already have high concentrations of food processing.

During a Tri-City visit with unnamed clients earlier this week, John Boyd shared his company’s results.

The idea that it costs less to produce food in the Tri-Cities is not surprising, but the reason to focus on it is.

The federal Food Safety Modernization Act, passed in 2011, could result in even more food processors choosing to set up plants in the Mid-Columbia.

The act is the most aggressive overhaul of food safety regulations since 1938. It focuses on preventing outbreaks of food-borne illnesses rather than responding to them.

As the U.S. Food and Drug Administration adopts rules and beefs up its inspections, companies are taking a hard look at their facilities. Many existing plants are obsolete and won’t meet the new standards, Boyd said.

“We’re going to see a new wave of development,” he predicted.

Processing the corn, potatoes, cherries, apples, asparagus and other crops grown in the region into meals is a key driver of the local economy. In July, the peak for food processing jobs, the Benton and Franklin food processors collectively employed nearly 5,000 workers.

The $270 million payroll in 2015 was 5 percent of the $5.4 billion in total wages paid in the region, according to the state employment office.

The FDA has been stymied by lack of funding to inspect the tens of thousands of food processing plants in the U.S. But one of the nation’s leading attorneys working on food-borne illnesses says that’s all the more reason for processors to scrutinize their operations.

Bill Marler, a Seattle attorney, advised food executives in a column to embrace the new food safety rules and regulations as an opportunity to prevent outbreaks.

“Playing by the rules, although far from perfect, provides the opportunity to avoid problems and prevent outbreaks and recalls and attendant costs,” he wrote on his blog.

While not directly tied to the federal rule changes, private companies have been making substantial investments in Mid-Columbia agriculture and food processing.

On Friday, Central Washington Corn Processors celebrated the opening of its new multimillion-dollar rail loop and grain handling facility in north Richland.

The facility and rail loop, built on land leased from the city of Richland, will increase the flow of commodities, including cattle feed, through the property.

And prior to that, New Jersey-based Preferred Freezer confirmed plans to expand its 455,000-square-foot commercial freezer and distribution center in north Richland to the Tri-Cities Area Journal of Business.

The freezer serves as a warehouse and distribution point for Lamb Weston’s frozen potato and other products and debuted in 2015.

Food safety focus

Carl Adrian, president and CEO of the Tri-City Development Council, or TRIDEC, wasn’t surprised that the area fares well on costs. Labor and power cost less in the Tri-Cities than most markets and water is abundant.

Property and sales tax costs are competitive as well, based on the types of companies currently scrutinizing the region.

“If I look at our list of active projects, the bulk of them are food processing,” he said.

Adrian said food safety is important to the region’s international customers.

Earlier this year, TRIDEC teamed with Lamb Weston to play host to a Chinese delegation in town to review food safety systems.

The visitors were able to see how companies such as Lamb Weston can track a potato from the plot where it is grown to a processing plant to Preferred Freezer on through the shipping system.

“The Chinese officials were quite impressed,” he said. “There is a lot of buzz in the food processing industry around food safety.”

Cost competitiveness

The most expensive market on Boyd’s list is San Francisco. The cheapest is the eastern Ontario district of Canada, already home to processing operations for Kellogg’s, Quaker Oats, PepsiCo and Nestle.

Boyd cautioned that Canada’s pro-trade politics and friendlier posture to immigration make it a worthy competitor to the U.S., where both Hillary Clinton and Donald Trump oppose the Trans-Pacific Partnership.

Canada has free-trade agreements with 40 countries; the United States has 20.

“In Canada, trade is being used as an economic development tool to attract food and beverage manufacturers from the U.S.,” Boyd said.

It costs half again more to operate the same plant in San Francisco than it does in Ontario.

Almost all costs, including labor, utilities and taxes, cost more in California. It costs almost 23 percent more to process food in the Bay Area than the Tri-Cities, the Boyd report said.

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