Declining sheep numbers last straw for Smithfield plant

Wednesday, 2 October 2024

Declining sheep numbers has led Alliance to a proposal to close Smithfield meat processing plant in Timaru.

Hundreds of jobs are on the line following the proposal for the South Canterbury plant which has more than 600 employees.

From 1990 to 2019, sheep numbers decreased by 53.6% from 57.9 million to 26.8m.

Beef and Lamb NZ’s annual stock number survey reported earlier this year that sheep numbers had decreased by 4.3% down to 23.31m due to both drought and cash flow concerns.

The proposal to close Smithfield had come at a challenging time for sheep farmers and processing companies, chairperson of Beef + Lamb New Zealand Kate Acland said.

“Our sympathies go to the staff and families affected by Alliance’s proposal to close its Smithfield plant.”

Acland said the significant decrease in stock numbers was a result of the conversion of sheep and beef farms into forestry, driven by the Emissions Trading Scheme.

The announcement reinforced the need for a decision to be made by the Government around carbon farming and climate change regulation, Acland said.

“Our sector needs certainty that controls will be put around the amount of land that can be converted into forestry and that there will be no price on agricultural emissions.

“The sheep and beef sector has already reduced its emissions significantly in the last few years as a result of land-use change — the threat of a future price only adds to uncertainty.”

Acland said that any future thought of a price on emissions would only make announcements like that of Alliance’s more common.

“This increased uncertainty reduces confidence in investment in the red meat sector, both at farm and processor level and exacerbates the risk we may see more of these announcements around the country.”

Federated Farmers meat and wool chairperson Toby Williams said it was “a very dark day” for Alliance.

'Firstly, we want to extend our sympathies to the 600 workers and their families affected by this sad news.“

The proposal was a reflection of the struggling sheep industry, Williams said, which meant the decision was not “out of the blue”.

Williams said that “wrong-headed and skewed” policy settings were the key reason the sheep and beef sector were under pressure.

“Federated Farmers has always highlighted that when poor regulations stifle farming, the impacts are felt throughout our rural communities and broader national economy.

“This is sadly coming into play today, and it is the people of South Canterbury who will feel this the hardest.”

A decline in sheep numbers due to land-use change meant the low volume of livestock supplied to the plant could not support its processing capacity, chief executive of Alliance Willie Wiese said.

While it would have been a tough decision to make for Alliance, Williams said it was an opportunity to reorganise the business so it could operate more efficiently.

“The directors are looking at the business and going, ‘What do we need to do to still be here in 100 years’.”

The plant was Alliance’s oldest, having operated for 139 years. This meant it required significant investment in repairs and maintenance to keep it operational, Wiese said.

Processing at a more modern, efficient plant would be of greater benefit to the business, Williams said.

“We can't hold a plant open just because we want them there. It needs to be efficient for the shareholders and efficient for the businesses to operate otherwise companies run the risk of having too higher costs and can't make their revenue.”