Review of costs of rendering

Summary

This report on the use of KPI’s and the costs of rendering meat plant materials involved the development of a model of the rendering processes and associated costs. Without the model as a reference the project would have been significantly more difficult. The development of the model has also provided a resource for future use. 

To determine suitable base references for the establishment of key performance indicators the use of Raw Materials, finished products and Hot Dressed Carcass Weights were considered. The lack of recording of raw materials sent to rendering made the use of this measure inconsistent and therefore measures based on material output and carcass weight were developed.

While a number of costs associated with rendering were surveyed the major costs elements of labour, Interest and depreciation, repairs and, maintenance and energy were identified as being the important cost elements incurred by rendering operators. 

Other costs such as environmental management and transport are not consistently incurred by the majority of processors and are therefore not included in the KPI’s. 

Rendering operations are capital investment based industries and incur relatively stable fixed financing and overhead costs. Labour employed is relatively low and energy costs are the largest variable cost item. Essentially the costs structure of an operation is largely dependent on the capacity utilisation of the plant. 

Meat processors with on site rendering facilities do not generally measure  or price in the cost of raw material sent to rendering. Service renderers do account for raw material received for processing. Consequently material rendered on site has no recorded value whereas service renderers incur costs for raw material and transport. For the purposes of costing
operations of on site rendering raw material was priced at $100 per tonne.

At $100 per tonne for raw material not all on site rendering operations would be profitable however with nil values for raw material all rendering operations provide positive returns for companies. Service renderers incur costs in securing raw material and in transport effectively setting a base raw material price equivalent for meat processors. 

Even at breakeven it is reasonable for meat processors to render products since the alternatives for disposing of the product, which can account for approximately 25% of the live weight of the animal, would need to be disposed of by other means incurring both cost and environmental problems for the meat processor. 

Generally returns for rendering for meat processors are returned to the business as part of the revenue accounted for in the abattoir operations.