16 Jun 2010

More lamb processing works likely to close

9:05 am on 16 June 2010

Meat industry professionals say it's inevitable that more lamb processing facilities will close, because of a decline in the number of sheep.

Silver Fern Farms, the country's biggest meat processor and exporter, plans to close its lamb cutting plant in Canterbury, along with the rendering and casings operations, because not enough animals are being slaughtered.

More than 170 jobs could be lost.

Meat and Wool New Zealand chairman Mike Petersen says the number of sheep has dropped by about 44% since 1990, mainly because farmers are switching to more profitable dairying.

It's likely, he says, that fewer than 22 million lambs will be slaughtered this year, compared with nearly 26 million two years ago.

Industry commentator Allan Barber says that if the trend continues, more plants will close in the next couple of years, or a company may even go into receivership.

'Consultation process' under way

Up to 135 jobs will go when Silver Fern's lamb cutting plant, in the Christchurch suburb of Belfast, is closed; and up to 39 people are also likely to be made redundant with the closure of the rendering and casings operations, at a different site in Belfast.

Chief executive Keith Cooper says the company began a consultation process with workers and the union on Monday and a final decision will be made on 25 June.

In Silver Fern's last significant restructuring, in 2008, more than 1000 jobs were lost when several processing plants were closed and the workforce was reduced at others.

The Canterbury branch secretary of the Meatworkers Union, Bill Watt, says the announcement is not a complete surprise, because lamb numbers have fallen significantly in the past two years.

Michael McHugh, who has worked at the lamb plant for 20 years, says workers have been told they will be given counselling and help in finding other work.

Change of strategy for Chinese market

Meanwhile, Mr Cooper, who has just returned from a trade mission to China, says the lamb industry faces a number of challenges selling its products there - because, he says, Chinese consumers prefer cheaper cuts of meat.

For the past 13 years Silver Fern has been exporting red meat to China at the commodity end of the market, but Mr Cooper now says that the future lies in supplying higher-value products.

He says the range of premium lamb, venison and beef cuts that have been developed for the New Zealand market are not culturally appropriate for the Chinese market.

Silver Fern Farms will adjust its marketing strategy and aim to establish joint ventures in China, he says.