Access to consistent & reliable labor has historically been a challenge for the meat & livestock industry. But COVID-19 has highlighted the risk in the food supply of a highly consolidated processing sector largely dependent on manual labor.
At least 15 plants have closed for some time due to labor shortages amidst the COVID pandemic, with many more (most?) running below capacity. And according to the Wall Street Journal on April 23, “U.S. beef production fell 24% compared with a month earlier, with pork off 20% and poultry down 10%, according to estimates from CoBank.”
The drastic and immediate impact on both live animal prices and meat/poultry prices is a perfect storm of 3 trends:
- Highly consolidated processing segment
- Highly labor dependent processing plants
- Public health crisis that is stress testing every institution & organization
What are the possible solutions, and what role could technology play?
Increase regional processing capacity. Twitter is abuzz with producers talking about the need for more regional processing capacity. Let’s say you find the capital to build or buy a plant. Great, now you have to find a way to run that plant efficiently with a fraction of the throughput of the big plants. Yet you are likely competing in the same commodity markets…yikes. Then you have to find a way to sell the whole carcass, not just the high demand middle meats….double yikes.
Scale matters in processing, as does operational and sales expertise. These unpopular truths are why most attempts by producer groups to move into processing fail. As Jayson Lusk said about the current hog market mess, “we’d need 100 brand new small packing plants to make up for the loss of one large plant.”
Though there is a critical place for small plants in D2C farmer plays, regional processing is not a silver bullet.
Decrease labor dependency. Processing is labor intensive with many of the big plants employing 500+ employees per shift. While newer plants are employing more automated equipment, increasing the use of robotics & automation in processing plants would reduce dependency on labor while potentially lowering costs in the process. At a time when poultry integrators are cracking eggs, hog farmers are euthanizing hogs, and feedyards have reduced placements by 25%, the current crisis highlights the risks to the entire animal protein value chain of being so highly dependent on labor in processing plants.
Labor represents 50-60% of processing costs. Decreasing labor dependence not only has the potential to increase “resilience” of the processing sector if we have another pandemic (no thank you), it also has the potential to decrease processing costs while increasing yields. E.g. steaks cut with the water jet significantly improves yield, without worker safety risks.
Depending on the upfront costs, robotics actually have the potential to increase the regional processor’s ability to compete with larger processors.
According to AgFunder, $179M venture capital was invested in (crop) farming robotics & equipment startups in 2019. There isn’t even a number that registers investment in automation for meat and poultry processing despite the huge opportunity in a $213B industry. If robotics are having a moment in crops, why is there such a lack of robotics/automation innovation in meat processing?
My hypothesis is that its an issue of access. It’s easy enough to find a farmer that will talk about their operation and problems to be solved, yet it’s close to impossible to understand the inner workings of meat processing unless you’ve worked inside.
To overcome the access hurdle, the industry needs to invest in the innovation ecosystem, to provide a way for entrepreneurial and technical talent to engage on the biggest problems vexing the industry. This could take many different forms from strategic venture funds to a NAMI sponsored startup event to industry backed startup studios.
Its time for industry leaders to find ways to align the best and brightest engineering and entrepreneurial talent around key opportunities in plants…do this well and smart money will follow.
- What founders or investors do you know that are working on robotics for processing?
- What aspects of processing do you see as most appropriate for automation?
- What is your organization doing to explore increased automation in processing?