With unemployment rates scraping historic lows throughout many economic sectors nationwide, an acute labor shortage is adversely impacting U.S. meatpacking companies now operating at virtually maximum capacity as cattle production climbs, squeezing them like a tightening vise.
Beef processing plants cite the growing labor dilemma as their major concern in a recent survey conducted by Cattle Buyers Weekly. CBW Editor and Publisher Steve Kay says many beef packers are worried they will not be able next spring and summer to process all the cattle that will need to be harvested, limiting the size of daily kills.
During a recent presentation, analyst Dave Weaber of EMI Analytics and Express Markets said the beef industry is expecting production could approach a record 30 billion pounds from the previous peak of 27 billion pounds, requiring more labor to slaughter an extra one million head at packing plants.
At a recent Agricultural Bankers Association conference, Texas Cattle Feeders Association President and CEO Ross Wilson said the labor perspective within the meatpacking industry has changed dramatically in the past 10 years because a widespread drought forced plants to cut workers down to 32 or 34 hours a week, prompting them to find employment elsewhere. Now, with market and weather conditions improving, they are needed back.
Mark Gustafson, Colorado Premium Foods international sales specialist, told WLJ that the U.S. meatpacking industry competes with construction, energy and other sectors, including the dairy industry, for skilled labor and management personnel who are in high demand as the robust U.S. economy drops jobless rates to 1-2 percent in some areas, creating an extreme labor shortage.
“It’s a real deal. There’s no doubt about it,” Gustafson said, noting turnover rates for packers are exceeding 50 percent and approaching 60 percent, when 35-40 percent would be more manageable, proving very costly for companies that can invest up to $7,000 per employee in training and other expenses.
“I would say labor is a tremendous issue for the industry across the board. It’s a difficult one to deal with in this environment. … It’s a Catch 22. … If we can’t retain those employees, we’ve got a problem.”
Colorado Premium has been engaged in outreach programs, job fairs and recruiting drives as it strives to “tighten that chain up between management and hourly employees” and enhance workforce retention. More emphasis also is placed on management supervisory training.
“One of the things that plagues our industry in the meatpacking business—it’s not the easiest work or most ideal work environment,” Gustafson said.
Employing 850 employees, Colorado Premium Foods—with plants in Greeley and Denver, CO, Chicago, IL, and Carrollton, GA—is the nation’s leading corned beef processor.
With some 40 years in the meatpacking industry, Gustafson joined Colorado Premium at the start of this year after running his own consulting firm, Gustafson & Associates. He has witnessed larger consolidations sharply reduce the number of packing companies from 30 to 40 when he started in the latter 1970s to a handful now as economies of scale are applied.
Much more emphasis is placed on food safety, quality assurance and technology. “In the beginning, it was keep it cold, keep it clean and keep it moving. … Technology has helped us become more efficient. Unfortunately, we’re as mechanized as much as we can be both in food service and production.”
Another major change Gustafson has seen in recent years is a more diversified work force, including more Hispanics, Asians, Africans and other ethnicities, compelling companies to adjust operations accordingly. “The immigrant labor force is certainly critical to our industry.”
Gustafson said he is concerned that with the United States dropping out of the Trans-Pacific Partnership (TPP) the U.S. could be put at a trading disadvantage and lose global market share to countries like Brazil and Australia. He also urged that a functioning USDA is needed and Gregory Doud must take charge soon as U.S. chief agricultural negotiator. Doud is President Donald Trump’s nominee for chief agricultural negotiator at the office of the United States Trade Representative.
“There are all kinds of regulations in the meatpacking industry that are no longer necessary. They cost us money, time and labor. We should streamline the regulations. When I started, we didn’t have one-tenth the regulations we have today,” Gustafson said.
CattleFax Senior Market Analyst Kevin Good told WLJ that packing companies like Tyson and Cargill have been closing plants, especially from 2005 to 2014, making the demand for skilled labor even more pressing. The cattle cycle is now on an upswing, sending many more livestock to meat processing facilities. A few newer plants still aren’t quite at killing capacity.
“We look at it from a big picture standpoint. No doubt we see challenges,” Good said, pointing out that innovative packing companies are offering better wages and more attractive packages to hire and retain employees. Some may need to extend daily work shifts from eight to 10 hours or run operations on Saturdays to get all the cattle harvested and remain profitable, he said.
The labor shortage remains a serious concern with feedlots and others calling virtually every day looking for help, Good said. An estimated 1.2 million more cattle will be slaughtered this year than last, and another 900,000 more next year, it is anticipated, but construction of new plants is not keeping pace.
“The bottom line is to get cattle dead. Packers are going to be forced to run plants harder and harder, which means they’re more prone to mechanical breakdowns,” Good said.
Compounding stress levels for packers is increased international competition. “This is so much more a global market. What takes place in China, Russia and Korea has an impact on every producer,” he said. — Mark Mendiola, WLJ correspondent
