Food processing occupies a powerful position within the food and fiber system. The industry has been likened to the center of an hourglass: raw agricultural commodities from more than two million farms and ranches flow through roughly 20,000 processors, which in turn sell their array of processed products to more than half a million food wholesalers and retailers. Over a hundred million domestic households consume the meat and dairy products, canned and frozen fruits and vegetables, milled grains, bakery products, beverages, and seafood.

The importance of food processing lies in its various economic functions. Foremost, processors convert food materials into finished, consumer-ready products through the application of labor, machinery, energy, and management. They employ handling, manufacturing, and packaging techniques to add economic value to raw commodities harvested from the farm or the sea. Virtually all agricultural products incur some degree of processing before reaching their final use. The value added varies by commodity: steers become meat, potatoes are turned into French fries, wheat is made into flour, apples become juice or sauce, and fresh salmon emerges as canned salmon. The farm value of fruit and vegetable products at the retail level—frozen peas, for instance—is about 20 percent, meaning that 80 percent of the retail value is "added" to the raw product during processing and distribution.

Adding value to farm products and other material ingredients is the principal way that food processing contributes to state and national economies. Such "value-added" processing activities represent the creation and distribution of wealth, which translates into additional jobs and increased incomes.

Finally, processors act as important middlemen within the food system. Consumer demand and agricultural supply information come together at the food processing center. For instance, a tight supply of frozen corn at the retail level is eventually transmitted into higher processor prices, a greater willingness to pay for key inputs, and a price signal to farmers to expand production or sell off their stored crop. In contrast, an unexpectedly short crop induces processors to raise their prices to retailers and distributors, which subsequently prompts a decrease in consumer demand.

This industry report uses industry definitions and concepts that underlie the U.S. government’s Standard Industrial Classification (SIC) system. In the SIC system, food processing is a major industry, one of twenty such industries that form the manufacturing sector, entitled food and kindred products. According to the Standard Industrial Classification Manual, there are forty-nine separate food processing industries. Each of the approximately 20,900 food processing plants operating in the United States in 1997 was placed in one of these forty-nine industry subsectors, and their food products were further divided into 170 well-defined food product classes.

Food and kindred products (SIC 20) is organized into the following nine major groups:

• meat products (SIC 201)—including meat packing plants; sausages and other prepared meats; and poultry slaughter houses and egg farms;

• dairy products (SIC 202)—including fluid milk, butter, cheese, and ice cream;

• preserved fruits and vegetables (SIC 203)—including canned and frozen fruits and vegetables, canned and frozen specialties, dried and dehydrated fruits and vegetables, pickles and salad dressings;

• grain mill products (SIC 204)—including flours, cereal breakfast foods, flour mixes and doughs, and pet food;

• bakery products (SIC 205)—including bread and other bakery products, cookies, and crackers;

• sugar and confectionery products (SIC 206)—including cane and beet sugar, candy, chocolate, chewing gum, and nuts and seeds;

• fats and oils (SIC 207)—including vegetable and animal oils and fats, shortening, and margarine;

• beverages (SIC 208)—including malted beverages, wines, liquors, soft drinks, and flavoring extracts; and

• miscellaneous food (SIC 209)—including fresh, canned and frozen seafood; roasted coffee; potato and corn chips; and macaroni, spaghetti, and pasta products.

Table 1

Employment by Washington Food Processing Subsector, 1981-1998
Source: Washington Employment Security Department

Economic Contribution of Food Processing to Washington State