Amid low unemployment rates, new facilities coming on line, labor-intensive work and a shrinking pool of available labor, some meat processing facilities are struggling to keep doors open and conveyor belts moving.

RaboResearch animal protein analyst Christine McCracken said when meat processing reaches its typical peak this fall, not having all facilities running at full capacity may cause an oversupply of live animals for the market. For livestock producers, this will likely translate into lower market prices.

“At the moment, the pork industry is seeing a tighter supply of workers in its processing sector. This reflects not only very low national unemployment rates but also the recent addition of four new slaughter plants in relatively rural areas with even tighter labor supplies,” McCracken explained.

A new RaboResearch report -- “Animal Protein’s Labor Pains: Industry Bottleneck or Game-Changer?” -- explored the employment challenges for the meat processing industry and weighs possible solutions.

“In the face of an already-tight labor market, the U.S. meat and poultry processing industry added over 28,000 new jobs -- 6% -- in the past 24 months,” the report noted. “Recruiting and retaining qualified workers in the meat and poultry processing industries was always difficult, but it is now a perpetual grind.”

Lost productivity due to record absenteeism and turnover are weighing on segment returns, something that is unlikely to improve in the intermediate term, the report explained. In fact, the cost of replacing line workers is high and can add as much as 4% to the cost of processing. This can result in up to hundreds of millions of dollars in lost profits for the industry annually.

Long-term fixes, the report said, may include integrating more automation, moving facility locations to areas with more abundant labor pools or developing more attractive employee and workplace benefits. In the short term, though, companies are still struggling to recruit and retain workers.

“As packers compete for the same workers, we have seen turnover increase by as much as 50% in the past year,” McCracken said. “We expect the pork industry to suffer first, but the broiler industry will soon follow. With as many as nine new plants and plant expansions underway that will require even more workers in the upcoming 18-24 months, we anticipate turnover and recruitment challenges that will stress the broiler market.”

Companies must step up their focus on operational improvements that can improve yield and reduce labor needs, the report said. “The traditional approach of treating employees as expendable is no longer an option. Recognizing this, the industry must actively explore all options and find the solutions that best meet its operational needs.”

In juxtaposition to the employment woes of the meat processing industry, U.S. farmers have increased animal production by 8% over the last two years in anticipation of continued growth in consumer and export demand.

“The long-term need to supply the meat products that consumers want is at the center of this challenging labor situation,” McCracken said. “There will be winners and losers in companies’ abilities to recruit and retain workers, automate and adapt supply chains. In the short term, the entire supply chain – including pork and poultry producers – will feel the pinch economically.”