Can robots save the meat industry?
Prime Future 002: the weekly newsletter highlighting trends in animal protein
It’s been a century of a week in the meat & livestock industry here in April 2020.
John Tyson said, ‘the food supply chain is breaking’, and many farmers would agree with him, while Cargill’s CEO responded, 'The food system is under strain but it is incredibly resilient'. Either way, my thoughts are with farmers making difficult decisions while sitting squarely between a rock and a hard place.
And my optimism is in how the value chain is already adapting to this dynamic moment and accelerating innovation amidst crisis. In light of the meat processing labor crisis that’s playing out publicly, and its impacts both upstream and downstream, this week’s newsletter focuses on reducing agriculture’s dependence on labor through technology.
Can robots save the meat industry?
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.
Questions:
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?
As an aside, although processing plants have been in the news because of the outsized impact of labor shortages, keep in mind that dairies, feed yards, poultry and swine farms are also wrestling with COVID-19 and its impact on labor availability. Automation adoption is one place where dairies shine in comparison to other sectors. Whether for feeding, checking health status, counting animals (whether in a hog barn or in a vast pasture), managing housing conditions (swine/poultry), administering vaccinations, and so on, there are many aspects of commercial scale production that are highly manual and require consistent labor.
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How to Bring Sexy Back to Animal Ag Innovation by Kerryann Kocher (link)
Kerryann Kocher Principal at Rock Road Consulting, recently shared some insights on what the animal ag industry can do to attract its fair share of the growing AgTech funding pie, while channeling entrepreneurs to solve the biggest needs in the industry like labor and transparency. Labor is consistently highlighted as one of the biggest challenges for producers yet only 9% of startups we track are working on robotics or automation solutions. Kocher also suggests some ways that animal ag can ditch the outdated brand of being slow adopters 👀 This is a summary of her presentation:
Rock Road Consulting has tracked a total of 166 startups with offerings across Animal Ag Tech. The companies range from Seed to Series B Funding and their target customer is the livestock producer. We’ve categorized this startups and the one question you ask when looking at the companies broken out by category is, are we innovating in the areas of greatest industry need?
The answer: NO.
Here are a few highlights from these 166 startups:
6% are improving Genetics/Breeding
9% are working on Robotics
2% are building solutions around the Environment
Entrepreneurs are solving for the wrong things, like digital or data. The biggest problems we need solved in animal agriculture are:
Labor
Transparency
What solution are you building to enable producers to use less labor or increase transparency through the supply chain? This is where we need entrepreneurial and engineer talent rallied.
So we attempted to look at what attracts meaningful innovation to an industry. I would propose that with 19.8B in venture-backed food and ag tech, that animal ag tech is not getting their share. Is it because animal agriculture is not as attractive as crops?
The answer: NO
Here are the proof points to back up that emphatic answer:
Per capita consumption of animal protein in the U.S. set a new record in 2019.
According to the ERS, on a national basis the economic size of the crop sector and the animal sector are about equal as measured by the value of production by USDA and have been since 1990.
Animal ag gets branded as being slow to adopt, perhaps due to the “closed systems” of livestock producers, making it difficult to know the needs to solve for. On the flipside the integration and specialization of the industry also creates fewer producers to reach….in comparison.
For cattle, we’ve heard VC’s say they don’t see the market of producers running cattle as a business as a large enough market
So of these factors that attract innovation, Kocher contends that adoption is where to start. Which leads to her 4 key points about how the industry can improve technology adoption by creating a culture of innovation:
Solve for real needs. This requires us as an industry to be clear on what those needs are…this is critical path to the future of protein. This invites problem solvers to seek solutions for our industry vs, apply technology to our problems! It also attracts new fresh talent to grow in our industry.
Invite Access. If you’re a producer or processor, create access points for entrepreneurs and problem solvers to feel, see, understand our challenges. Culture is defined by behaviors. What if we are known as the most available, accessible, open and enthusiastic market for innovation….instead of slow adopters, a brand that does not attract entrepreneurial talent or venture capital to the space.
Adopt and Iterate. Once we have provided access, allowed new comers into our farms and ranches, tried new theories and created space to do things different than they have always been done. And then it FAILS…the defining behavior is what comes next. Do we ITERATE…or do we penalize the proposed solution and give up. How do we remove the fear of failure and subsequent product adoption, but iterate to mutual solution.
Be Proactive. If every organization in our industry said we will set aside 5 days a year to seek out and engage within innovation ecosystems, try new technology or just do something in a new way, we could start down the path of creating a create a culture of innovation .
COVID fallout slashes processing capacity
Before we look at the journey to incorporate robotics in processing plants, here’s a visual on why it’s so necessary. This week the Wall Street Journal highlighted the drastic drop in slaughter capacity through the COVID-19 labor crisis:
Consumers
1) Thought: Restaurants and retailers have spent years optimizing for an improved customer experience, yet overnight they’ve been forced to optimize for customer safety. Interestingly, technology can enable both objectives. Increased ordering online is why Instacart has hired 550,000 people in the last 6 weeks. This highlights the fact that it doesn’t have to be people OR technology….the real question is, where do companies most appropriately allocate technology AND people? Perhaps Amazon’s cashier less system could allow retailers to reallocate labor to higher impact tasks….like the meat case. (Click the image for article.)
2) Here’s a thought provoking idea from Midan Marketing, perhaps one solution is to recalibrate where the work is done in order to access existing labor.
"I am not suggesting we reinstate swinging beef, but we could potentially solve plant personnel challenges by changing the break and packing primal cuts or even quarters. Raw material can be shipped to retailers, where the butcher cuts and packs back of house. Sounds old school, but it re-establishes communication between the consumer and the butcher. Retailers can truly educate again, customize cuts and deepen trust with the consumer. You may ask, “Where can we source skilled butcher labor?” Get creative and seek out restaurant chefs, tap into culinary schools and possibly processing facilities."
3) This one is out there, but in a world seeking to minimize human contact, maybe it’s not so crazy. A vending machine for eggs…a contactless buying experience. This reminds me of Farmer’s Fridge, the startup selling fresh salads through vending machines in airports, office buildings, etc. What if an egg company teamed up with Farmer’s Fridge to sell ready to eat egg snacks?
Questions For You
Who is working on meat processing robotics? On farm?
What’s an interesting startup in animal agriculture that should be highlighted in this newsletter?
About Janette
Janette Barnard works to enable technologies throughout the animal protein value chain. She leveraged her commercial experience with Elanco Animal Health, Cargill, and McDonald’s Global Supply Chain team to launch and grow two animal protein focused startups. Janette is now a principle in Rock Road Consulting, helping companies to launch, source, and fund innovation.
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