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DAVID KRUSE

Ag sector labor crisis

July 6, 2017
Farm News

The topic is the coming Ag sector labor crisis. I think that one of the hot spots for a shortage of Ag sector labor will be in northwest Iowa and the surrounding region. We have large egg, hog, cattle, and dairy operations here. There are turkey and hog plants in Storm Lake, hog processing plants in neighboring Minnesota and South Dakota and the huge Tyson Beef plant in Dakota City, Nebraska.

Wells Blue Bunny is located in LeMars. There are a number of smaller livestock, poultry and other processing plants in the region that add another increment to employee needs. We work with dairies in the region and they have been struggling with sourcing labor for some time where it is their biggest management issue. The new pork plants that are being built by Seaboard/Triumph and Prestage in this area are going to throw some more logs on a labor shortage fire that is already burning.

I commented earlier in a report: "It is not just the 1100 people they (Seaboard/Triumph) need to hire for the first shift (that will double when they go to two shifts) but the suppliers of goods and services to these plants including new hog barns also need to be staffed. That is hundreds more new hires that have to come from somewhere. I expect the plants want documented workers. The flow of the other kind has been significantly slowed at the border. There is a system of musical chairs going on where operations audited by the INS purge workers that just go somewhere else the INS hasn't been yet. They are not deported, instead just going to a new job which is very easy to find. The competition for documented workers is getting fierce. They put a lot of new robotics in this plant to keep the number of workers needed at a minimum." But that is not going to dampen this fire.

A subscriber who is a dairy farmer e-mailed me to share his perspective of the struggle that he has been having staffing his milking barns, saying:

"You are right on when you talk about the labor problem coming down the road for Ag. I can tell you that on dairies there are very few immigrants looking for work. The border crackdown has shut off the flow. The head of HR at XXXXXX XXXXX Eggs told me the other day, that within 6 months they will have their starting wage at $15 per hour. Blue Bunny is paying a high wage and they can't find enough people. I had to offer my third man from the top another $10K/year the other day because he was going to start working for Wells. I had to do it because I know he is one of the few that are documented.

"So that leads me to the next story. The biggest dairyman in XXXX (as far as I know), XXXXXXXXXXXX, is going around and stealing other dairies' workers. He had an I-9 audit and is now being forced to let go of all his undocumented employees. This is the same thing that happened to XXXXX Dairy in February of 2016. They had to let about 26 people go while continuing to milk over 3,000 cows 3 times a day. INS does an audit and forces them to let them all go and causes massive chaos on both of these dairies. He is desperate to keep his operation going, as anyone would be. I don't know how I would handle this situation if it happens to me, so I'm not going to get too upset for what he's doing.

"What does REALLY XXXX me off is that all these hard working people are just being absorbed back into the labor force and these businesses have massive chaos which could potentially put them out of business. These dairies are producing huge dollar turnover in their communities, not to mention paying taxes and social security taxes. These "silent" raids accomplish nothing!! I'm just wondering when our politicians are going to pull their heads out of their collective XXX and put a stop to it? It astonishes me how little they get done for the American people and for business growth.

"So what are the choices I have if I want to continue my business? Put in robotic milkers, which takes way too much time and money, or tap into documented workers through a head hunting business (again, time factor and bureaucracy), or pay more than all the other businesses in the area. It looks like it will be the businesses with the greatest margins that will be able to maintain a full (legal) labor force. Some businesses are going to lose in a big way going forward. The cost of labor, from my perspective, could get out of control. Time will tell how "great" that will be for the American people.

"I don't tend to be a fearful person, but this labor thing is starting to get to me. These are families that I know personally and they are being put in a position that they have no control over. VERY discouraging."

As to hiring hard working Americans, they are all already employed in this region. The region is at full employment at a lower unemployment rate than the national average. The ones left could not pass a drug test and don't last a week before they decide this hard work is not for them regardless of the wage scale. There is going to be a huge wage competition that will literally, as my friend noted, threaten to put many who rely on documented labor out of business as they bid against each other to secure qualified workers. This cost will be passed on to consumers who will not like the sticker shock. There will be blowback on livestock and dairy industries from higher retail prices. History says that consumers will then blame the Ag sector for high prices when they set the immigration and labor rules up against these businesses.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

 
 

 

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