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Cold Storage & The Food Supply Chain

Jun 15, 2022
Posted by: Stearns Bank
Cold storage checked with thermometer

As we go about our daily business – working, playing…eating – we can tend to forget about where our food comes from. But we also forget, or perhaps never realized, that between the growth point of the producer and the purchase point of a storefront, our food must be kept in the perfect conditions.

In this article, we're exploring cold storage and some financing options to help start or grow in this spoil-free industry.

A key player in the essential freshness game

Fresh – It’s the ideal way to consume food. The fresher the food, the more nutritious it is, which can lead to plenty of benefits: more energy, healthy blood pressure, a stronger immune system, improved organ function, healthy teeth, bones, digestive system, and much more. Oh, and it tastes better! Thanks to the innovations of agriculture, foraging for our next meal is not a necessity – instead, we generally have a variety of meats, grains, fruits, and vegetables at our disposal.

While pricing and supply have hit some snags because of the pandemic in recent years, overall, the food supply chain is keeping up and cold storage keeps it plugging along every step of the way.

What is cold storage?

Cold storage is a link in the vast food supply chain that we all rely upon. Cold storage, also known as cold stores, cold chain, or large refrigerated warehouses, keeps fresh fruits, vegetable, dairy, and meats at the correct temperature to prevent waste and deliver safe products to consumers.

These types of facilities or transport systems are typically built using steel-faced polyurethane cored sandwich panels, creating massive temperature-controlled environments large enough to keep plenty of products fresh, all over the world, before distribution.

What is the food supply chain?

Essentially, the food supply chain is the journey food makes from farm to table. It’s all the activities involved in turning raw materials in to ready-to-eat products. The journey can be broken down into five main sections:

  1. Production

This is where it all begins. Producers include farmers, ranchers, and food manufacturers. They each must adhere to local and international guidelines and laws that regulate quality standards. Thanks to co-ops and other partnerships both in the United States and across the globe, consumers have access to a variety of foods throughout the year from millions of producers.

  1. Processing

Processing turns commodities into new food products or ingredients that will go on to create something else. Washing and preparing, slicing, and dicing – many foods need to be prepared and packaged. Beef or poultry, for instance, can be processed into many cuts or be ground, or used as an additive to countless other products – the possibilities are seemingly endless.

Similarly, eggs (once they are washed and sanitized), have plenty of potential including whole eggs, egg whites, hard-boiled eggs or as an addition into millions of other products. Other examples include turning peanuts into peanut butter; grains into cereals; or tomatoes into marinara sauce. Immediately after processing, cold storage comes into play for many products, keeping them at the perfect temperature for safe and delicious consumption.

  1. Distribution

The link between the processor and retailer. Boats, trucks, planes, and other modes of transportation play a role in distribution. In a global sense, food takes huge treks to get where it is needed. No matter the distance, cold storage needs to hold up its end of the deal by maintaining the ideal temperature – from cool to completely frozen, each product needs to meet the retailer in the right condition upon arrival.

  1. Retailer

Brick and mortar grocery stores, supermarkets, and even online services take on the role of selling products to consumers. They create shopping experiences that are convenient and gain customer loyalty through pricing, store layout, advertising and more.

  1. Consumer

Perhaps the most powerful aspect of the food supply chain, consumers have the authority to demand certain products – and the money they spend flows up and down the entire supply chain. Demanding products that are organic, all natural or sustainable, customers are constantly driving change, especially as they are paying closer attention to what their food goes through to reach the fork.

Where does cold storage fit in?

A strong food supply chain ensures that consumer food demands are met. Cold storage, in any capacity, ensures that as little goes to waste as possible every step of the way. Cold storage fits into the equation nearly everywhere, as do various regulations set by the Food and Drug Administration and USDA.

As technology improves, this innovative industry keeps pace, answering developing demands with improved logistics and more sustainable approaches.

Are there financing options available to start or expand a cold storage (and other food supply chain businesses) facility?

While there are multiple lending options to choose from when it comes to starting or expanding businesses, cold storage businesses and other participants of the food supply chain have a limited-time financing option.

In late 2021, the USDA announced its Food Supply Chain Guaranteed Loan Program to help “increase capacity and help create a more resilient, diverse, and secure U.S. food supply chain.”

USDA outlined three priority outcome goals for this program:

  1. Catalyzing economic recovery within disadvantaged rural communities impacted by COVID-19 pandemic.
  2. Ensuring all rural residents can equitably access and/or benefit from Rural Development (RD) programs and funded projects.
  3. Reducing climate pollution and increasing resilience to the impacts of climate change through economic support to rural communities.

While these funds can be accessed from different types of lenders, you’ll want to consider a designated USDA multi-state lender like Stearns Bank to support your loan. This type of lender can process your USDA loan directly with federal agencies. Although most USDA programs have geographical requirements, this Food Supply Chain program does not have restraints based on location.

Lenders may provide the loans to eligible cooperatives, corporations, for profits, nonprofits, Tribal communities, public bodies, and people in rural and urban areas. The program will remain available until funds are expended.

What can the funding be used for?

Funding from this USDA program may be used to start-up or expand food supply chain activities such as aggregating, processing, manufacturing, storing, transporting, wholesaling, or distributing food; address supply chain bottlenecks; or increase capacity and help create a more resilient, diverse, and secure U.S. food supply chain.

So, if you’re intrigued by an ever-changing, highly-sought-after industry that everyone relies upon, cold storage or any other food supply chain business may be the perfect place to make a fresh start. If you’re already serving the nation or the world and are ready to develop further, don’t spoil this opportunity for additional funding options.

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