Processing

Cattle supply forces retrenchments at two JBS Qld plants

Jon Condon, July 15, 2016

 

Dinmore aerial

 

THE prolonged and deep shortage of slaughter cattle across eastern Australia has forced the nation’s largest processor to put permanent staff off and reduce killing capacity for the foreseeable future at two Queensland plants.

JBS Australia this morning told staff there will be a series of retrenchments at the company’s Dinmore (pictured above) and Beef City facilities, as the company is forced to take action to match its production capacity with available stock supply.

The move follows rumours of substantial retrenchment of staff at Inverell’s Bindaree Beef plant in northern NSW last week, although the move is so far unsubstantiated by the company. If they are true, it could effectively halve that plant’s throughput capacity to 3000 a week, Beef Central was told. More than 100 casual employees at Bindaree are known to have lost their jobs about three weeks ago. Bindaree has been described as conspicuously low-key in saleyards over the past week.

JBS told staff at the company’s Dinmore plant near Ipswich this morning – the largest processing plant in Australia with a normal daily two-shift capacity of 3400 head – that for the foreseeable future the plant will operate on a two-shift, four-day week, with no kills taking place on Mondays until further notice. That process will start week commencing August 1.

All beef plants across eastern Australia have struggled to put together kills over the past six months, as the accumulated effects of two years of severe drought on national herd size takes a heavy toll.

To this point, most processors have tried to manage the process by reducing daily tallies within shifts, or skipping days, limiting some sheds to 3-4 day working weeks for much of the year. That now appears to have taken a more permanent course of action.

JBS hopes to maintain a tally of 1700 head per shift at Dinmore for the four working days it now operates each week.

This time last year, Dinmore was killing tens shifts per week, at maximum capacity. About 150 permanent staff were lost back in March this year, when weekly shifts reduced to nine, as cattle flow started to slow. The latest reduction in killing days announced today will unfortunately lead to 160 further permanent staff being retrenched.

JBS’s Beef City dedicated grainfed processing plant near Toowoomba faces a similar position.

Staff have been told this morning that while it will remain a five-day, two-shift kill-and-bone operation, daily throughput (and consequent staff levels) will decline about 15 percent, from 1134 head to 972 head/day. That move, to take place week commencing 25 July, will necessitate the loss of 60 permanent staff.

The chronic shortage of slaughter stock is clearly reflected in numbers on feed in JBS’s own feedlots, currently down about 17 percent on where they sat this time last year. That supply represents a substantial portion of Beef City abattoir’s weekly kill.

JBS Northern chief operating officer Anthony Pratt said at the end of the day, the company had been forced to scale-back production capacity, because the supply of killable stock simply was not available to maintain production.

Because of the reduction in throughput also happening at other company processing sites, there was no opportunity to redeploy retrenched staff from Dinmore or Beef City elsewhere within the business.

“Not only do we not have the livestock numbers to be able to continue to operate at previous levels, but every carcase we put a knife into at the moment we are losing serious money on,” Mr Pratt said.

“We are hardly incentivised to try to keep pushing-on, when we can’t procure the cattle, and any that we do buy, we show a big loss on.”

Mr Pratt confirmed that in reducing weekly throughput capacity at Dinmore and Beef City, the cost to operate, on a per beast basis, “certainly goes up.”

“Obviously these decisions have been difficult to make, but we’re hoping it may help us maintain rates of kill at other company facilities. But none of us know the future, and the way this (the current supply/demand environment) is going, it’s looking very, very grim for the industry, in the medium-term.”

“If we could see any blue sky – anywhere, in the foreseeable future – we would not be making these decisions,” he said.

In the face of severe stock shortage, slaughter cattle prices across eastern Australia have pushed to dizzying new record levels over the past six months. As reported in Beef Central’s weekly kill reports, competitive southeast Queensland slaughter grids this month have four-tooth grassfed ox at 570c/kg and heavy cow 525c/kg. This week last year, those same descriptions were worth 455c and 435c, respectively, on an already rising market, a change of anywhere from $280 to $400 a head.

At those purchase rates, and with an A$ sitting stubbornly above US75c, export processors from Victoria to Central Queensland are currently losing money hand-over-fist. One large Victorian processor last week told Beef Central his losses were around $300,000 per week, under current operating conditions.

Another large export processor, Teys Australia, in February announced redundancies at its Wagga NSW plant, as part of a wind-back in killing capacity to 1100 head per day. That followed a similar announcement a week earlier, regarding the company’s Lakes Creek plant near Rockhampton in Central Queensland.

Teys claims its Lakes Creek facility is one of the most efficient processing plants in Australia, employing more than 1100 workers at its peak last year, contributing $357 million to the local economy including $155 million in household income via wages, and supporting around 1300 additional jobs in the region.

August is now shaping up as a catastrophic month for cattle supply, processors say, and it may well force the hand of more companies to take drastic action on staffing levels to stem losses.

“Processors can sustain it for a period, but it gets to a point where more serious decisions need to be made. It costs less to close or reduce throughput for a period, than it does to kill cattle,” a Victorian processor contact said.

Beef Central reported a number of plant closures in Victoria in this article last week.

A number of southern plants are currently on, or will shortly take a ‘normal’ mid-winter seasonal closures, for ‘maintenance and upgrade’ purposes. Both Teys Naracoorte and NH Foods’ Wingham have two-week closures scheduled. Most southern export plants have killed four days, at best, over the past few weeks.

 

 

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Comments

  1. Shane Irwin, September 10, 2016

    I could have not said it better, Cilfford!

  2. cliffordnaylor, July 16, 2016

    Our beef price at the supermarket is through the roof ….our Beef is being sent off shore via live Exports ….people are finding “alternatives ” to steak or lamb …due to the horrendous Charges of these meat products …..and why on earth do we “Import Pork ” …?? the livestock industry needs to look at itself for long term solutions rather than these Volatile market swings …there has always been…more money in fast nickles rather than slow dimes ….. and we should STOP selling our land to foreign companies …we will lose OUR food security ……!!

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