Even before Homeland Security put a ratchet to the threads of American commerce, few were willing to discuss it openly. And now, with the elevated threat level of stronger enforcement and stiff penalties, the discussion seems to have gone as deeply underground as the issue itself.

Nobody wants to talk about undocumented workers, much less admit they hire any. But the fact remains that undocumented workers, primarily from Mexico and Central America, have long been the backbone of American agricultural production. From an onion field in South Texas to a barbecue restaurant in Minneapolis' Mall of America, and the feedyards and packing plants in between, undocumented workers have been an integral part of the large and complex mechanism that puts food on consumers' plates around the world.

Losing that source of labor, ag producers intuitively know, would be a big blow to their competitiveness in a market that can be ruthless to the non-competitive. Now, cattle producers can get a glimpse of just how big the blow would be.

Economic model

Early research by Parr Rosson, director of the Center for North American Studies at Texas A&M University and an AgriLife Extension economist, is beginning to shed a little light on the issue. Rosson initially began his research by looking at the effects of a tightening labor situation in vegetable production, and has recently expanded his scope to include beef production.

The beef production research used an economic model to look at economic impact in terms of sales, income and job losses associated with a 25% reduction in available labor in Texas beef packing plants. “The reason we did that is because they're at the top of the chain in terms of distribution. Anything that happens there has a ripple effect throughout the feedlots, the ranching sector and supporting industries,” Rosson says.

He chose the 25% figure based on estimates by the Pew Hispanic Center, which says close to 25% of the workforce in meatpacking is undocumented. That figure, however, is less than other parts of ag production. “It's estimated by USDA and the Pew Hispanic Center that undocumented workers throughout agriculture nationwide account for somewhere between 45% and 47% of the ag workforce,” Rosson says. “So that's about 2.2 to 3.1 million undocumented workers who are employed in agriculture.”

In his preliminary analysis, Rosson assumed there would be a limited domestic labor supply to take over the undocumented workers' jobs at the packing plant and there was no new technology in the short run that could be immediately adopted to compensate for the labor loss. His estimates focused on the packing, feedyard and ranching sectors in Texas.

Economic impact

Based on a 2006 baseline estimate that Texas packing plants employed just over 16,000 people, a 25% reduction in available labor would mean slightly more than 4,000 jobs would go unfilled. When that economic impact ripples down to cattle producers and the businesses they rely on for goods and services, job loss associated with the cattle feeding sector is estimated at around 9,400, and the ranching sector was estimated to lose about 2,200 jobs, according to the economic analysis.

The estimated dollar impact is also an eyebrow raiser. “We estimated that the total sales loss at the packing level would be around $1.6 billion, and income losses would be about $209 million. In feedlots, we estimated the total sales loss to be about $626 million, and income loss to be about $66 million,” Rosson says. Texas ranchers would see a $146 million drop in total sales and a $15 million decline in income, according to the estimates.

“What this tells us is the packing industry (in Texas) would no longer be able to purchase $600 million worth of product from (Texas) feedlots. In turn, those feedlots are no longer able to purchase $146 million in product from the ranching sector.”

What could happen, Rosson speculates, is that if packing plants cannot function at peak capacity and efficiency because of a lack of available labor supply, their ability to maintain slaughter levels will decline. “Then you're going to get a backlog of cattle and lower prices for live cattle. Cattlemen will eventually move cattle; it just won't be at the same level, volume and price as before.”

In addition, a significant amount of contraction could occur in the many support businesses that beef packing and feedyards rely on, such as grain and feed, transportation, wholesale and retail trade and others. “The other sectors had total sales losses of about $1.4 billion,” Rosson says. “So what we found was the losses outside the beef sector were nearly as important as the losses to the beef sector.”

The estimate shows that a 25% labor loss at Texas packing plants could result in a total job loss of more than 12,600 in those supporting businesses. Under this scenario, total sales in those supporting businesses would decline around $1.3 billion and income would drop around $688 million.

Rosson stresses that the estimates are preliminary and a lot of refinement will happen as the work progresses, meaning the numbers will likely change. And packing plants have long responded to ups and downs in available labor by looking at other ethnic groups, particularly ethnic refugees, for the human resources they need to operate. But the scenario it represents is real. “The loss of immigrant labor is likely to have negative impacts on the Texas beef industry,” he concludes.