Things really are not going well for pork packers and hog producers.
With the new tariffs in place, Hormel Foods Corp. Thursday said its 2018 sales will fall below previous estimates, and Rabobank’s RaboResearch economists said in a release that packers are dealing with a shrinking labor pool. All of this could mean lower market prices for producers, Rabobank said.
With low US unemployment rates, new facilities coming online and a shrinking pool of available labor, some meat processing facilities are struggling to keep conveyor belts moving, RaboResearch animal protein analyst Christine McCracken said in the study. She added that when meat processing reaches its typical peak this fall, not having all facilities running at full capacity may cause an over-supply of live animals for the market.
FIXES INCLUDE MORE AUTOMATION
Long-term fixes may include integrating more automation, moving facility locations to areas with more abundant labor pools, or developing more attractive employee and workplace benefits, RaboResearch said. But in the short term, companies are struggling to recruit and retain employees.
“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 to 24 months, we anticipate turnover and recruitment challenges that will stress the broiler marker,” she said.
ANIMAL PRODUCTION COMPLICATES MATTERS
In juxtaposition to the employment woes of the meat processing industry, and to make matters worse, US farmers have increased animal production by 8% over the last two years in anticipation of continued growth in consumer and export demand, RaboResearch said.
“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,” she said.
HORMEL LOWERS OUTLOOK
Hormel Wednesday lowered its fiscal 2018 sales forecast to $9.4 to $9.6 billion, after falling short of third-quarter earnings estimates. The company lowered its sales outlook to a range from $9.70 billion to $10.10 billion.
The company said the new outlook was because of market volatility because of market tariffs and broader industry dynamics.
Wholesale prices for major pork cuts have struggled this year, especially since late spring. USDA data show prices for loins and hams staying below the 2012-2016 average all year. And many market analysts have said there is little to recommend forecasts for a surge to higher ground with seasonal production set to rise into December.
CATTLE, BEEF RECAP
280 head of fed cattle traded Wednesday on the Livestock Exchange Video Auction at $109.50 per cwt, down from the last sale at $110.07 three weeks earlier.
Cash cattle traded this week at $109 to $109.50 per cwt on a live basis, steady to down $1 from last week. Dressed business was done at $172 per cwt, down $1 to $2 from last week.
The USDA choice cutout Thursday was up $0.33 per cwt at $214.37, while select was up $0.02 at $203.99. The choice/select spread widened to $10.38 from $10.07 with 76 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday, was $150.64 per cwt, up $0.80. This compares with Thursday’s Aug settlement of $149.02, up $0.32.