Cattle Q&A with Will Sawyer -

He spoke with Progressive Cattleman Managing Editor David Cooper about the August 2018 CoBank report “Help Wanted: Wage Inflation and Worker Scarcity; U.S. Agribusinesses Experience Hiring Headaches.”

The report examined multiple ag industries, including the beef industry, with insights from cattle feeders Cactus Feeders and Friona Industries.

The interview has been edited for clarity and brevity.

How much has the beef industry prepared itself on the discussion for labor needs?

Sawyer: A lot of folks outside of the packing plant really haven’t seen this as a problem that’s been coming. The [beef production] audience in itself indicates we’re having an aging problem.

On the labor side, they saw this becoming a bigger issue because I think, in general, the immigration issue is not an issue of the current administration, or the previous, but has been an ongoing problem since the recession.

Efforts have been made in terms of wages and benefits to keep labor as much as possible, but it’s an ever-growing issue. I think that’s why a lot of employers, especially at the packing level, are making investments to try to minimize their labor needs as much as possible.

How much have those efforts helped?

Sawyer: I think given how much you speak to people, it’s still a problem. There was only so much the industry can do. In the end, a lot of producers are being put in a tough situation of just having labor problems that are the worst they’ve ever seen.

So the efforts have been, I wouldn’t say futile, but I think it’s a problem with very few alternatives. That’s why the industry finds itself in a tough spot.

What are the toughest items for labor from the entire beef industry’s standpoint?

Sawyer: If we look at it from cow-calf to retail distribution, there are a lot of opportunities for mechanization and reducing the need for labor as we get closer to the consumer.

I think where it’s the most difficult is at those production pressure points. That’s obviously at the farm and ranch level. The cow-calf operator has very limited opportunities to automate, to mechanize, to do the things we do at plants.

You’re seeing major investments at the packing level, in pork and poultry as well, to use mechanism and minimize labor as much as possible. At the farm level, machinery can only do so much.

Who will automation affect the most?

Sawyer: The packers. They have their goals of trying to focus on the least amount of skilled labor possible first. When we look at the packing portion of any plant in protein, that part of the facility is where automation, from putting product into packages, crating, storage, takes effect.

See the amount of automation today versus 10 years ago. And the number of employees required at that stage is so much less than what it was 10 years ago, that’s an area where we see significant opportunities.

There are a lot of meat companies investing in start-ups in sonar and using imagery to improve and find opportunities at the cutting floor. That’s the kind of dream for a lot of automation. They’re still working on the periphery and trying to find their way into the plant where a knife isn’t actually necessary.

But who will pay for it? Will they pay for themselves, the customer pay, could it go upward to producers?

Sawyer: Administrations have become increasingly stricter about labor and the legitimacy of that labor as years have gone on. And the consequences for those companies become even more significant. The cost benefit definitely warrants itself.

The decade the industry has had from the immigration raids of a decade ago to today, a lot of companies have come in and said, “This is a good signal for us to innovate.”

A lot of this is paying its way. A lot of production managers across protein are going to Europe, to Australia, to see where there is increasing automation there versus where we are in the U.S. And using those examples and bringing them back here.

The Europeans, they’re in some ways the good guys and in some ways, not so much. But in addressing those labor problems, the Europeans have a lot to teach us.

Talking about feeders, the study showed a lot of the incentives they have tried to use, lifestyle and working for a right-sized company, it doesn’t quite compete like the higher wage. It’s going to take a good wage to keep those workers in feeders. Is that right?

Sawyer: Wages are better in this economy. It’s not 2009 anymore. The economy now requires, at least for this labor-intensive part of agriculture, whether it’s cattle feeding or anything at the plant level, a higher wage. The way you really see that materializing is with companies discussing the automation they’re doing and what they’re willing to spend to do that.

Beef, it’s harder for us to get a feel than poultry and pork because you have these new plants coming about. Those are being very vocal in what they’re doing to reduce labor.

This higher wage is a byproduct of the fact you have a really strong labor market. Labor conditions and wages in Mexico and Central America really require those in U.S. agriculture to raise their pay. That’s the nature of the beast. I’m afraid that’s going to be a long-term trend we’re going to see.

Other protein markets, in Europe and Australia, are examples of how you can deal with that. The U.S. is trying to spend time understanding those variables.

Will more observance on this issue be more required from the beef producer to see how they’re going to protect that labor segment?

Sawyer: A lot of folks within the beef supply chain have observed these labor issues, especially at that (packer) plant level. And for dairy, it’s pretty consistent throughout the supply chain. So for cow-calf folks, their views have been relatively consistent, but now the packing plant is having to say “We’re spending X many millions of dollars trying to address these labor issues.”

There should be a level of awareness to who ends up paying for that. The retailers today have a lot of evidence to go by that they can force food producers to cover those costs, for all kinds of things consumers are demanding. The penalties for not following that are pretty significant, as far as what the consumer is willing to vote. So that ends up all the way at the farm level eventually, and I’m afraid that will not be that far off.

The need for production agriculture to take notice and to be more aware of what’s happening in Washington as it relates to this issue is probably time well spent.