Processing

Complex considerations in re-opening Townsville export beef plant

Jon Condon, 08/03/2016

JBS Australia’s northern chief operating officer Anthony Pratt’s comments in this morning’s separate story on calls for government intervention on live export (click here to view) come as his company approaches the 2016 season opening at its Stuart export plant neat Townsville.

JBS confirmed that Wednesday, March 30 will see the commencement of killing operations at Townsville this year.

JBS Northern COO, Anthony Pratt

JBS Northern COO, Anthony Pratt

“We have purposely not engaged in discussion over likely opening dates in Townsville this year until we were in a position where we knew more about cattle supply outlook ourselves,” Mr Pratt told Beef Central.

An early tentative date around mid-February was floated, but few cattle were attracted when grids were circulated, making a start at that time ‘unrealistic.’

“We did not have a definitive starting date earlier – we knew that we wanted to open, but we needed to be assured of availability of cattle first,” Mr Pratt said.

He said producers, generally, had been ‘very understanding’ of the company’s difficult position, despite the fact some remain in difficult seasonal circumstances themselves.

Daily kill winds back to 660 head

The initial stage of operations at Townsville this year will see a reduced single-shift daily kill of 660 head – roughly two thirds of the site’s full daily capacity of 903 head.

“We’re then in the lap of the gods over the course of the year as to whether we can lift that number, or whether we stay at 660 head for the year,” Mr Pratt said.

While some former staff had left JBS’s employ because of the prolonged summer plant closure this year, most of the permanent workforce would be returning to work, he said. There will be fewer casuals engaged this year however, due to the reduced throughput.

Mr Pratt said in JBS’s mind, there was never any prospect that Townsville would not open at some point in 2016. The company felt that circumstances would always reach a point where the supply of cattle would dictate that a start could be made.

He said JBS was now satisfied that it had some ‘depth’ in its livestock supply commitments in the region, sufficient to go ahead with the March 30 season launch.

“Those supply commitments have given us enough confidence to kick off. Obviously we don’t know what the future holds three or four weeks after that, but we feel confident now that supply will be there to maintain a kill.”

Despite the mounting local supply challenges caused by drought-forced herd decline and vigorous live export activity in the region, Mr Pratt said JBS grids for supply to the Townsville plant would remain in line with the company’s other plants further south.

“We’d love to be able to pay more at Townsville, but in the current world beef market, the reality is that current processor grids being offered to producers mean we are currently slaughtering cattle at a considerable negative margin,” he said.

“Most people will understand that if processors were making any money at present, grids would be rising, because all processors are short of cattle. The fact that grid prices aren’t lifting should demonstrate to people where profitability is for processors. Nobody works a plant only three days a week if it is making money.”

Mr Pratt said it was quite possible that Townsville might have to source cattle from a larger catchment area than normal this year, to stay in production. By nature of its location, Townsville has traditionally processed a lot of cull cows in its annual kill, but female slaughter this year was likely to be ‘well, well down.’

A relatively large cow kill also exposed the plant to the huge 100c/kg decline seen in the US grinding beef market over the past six months. About 33pc of the typical body going through Townsville ends up on the trim/manufacturing beef market, as opposed to just 23pc at a site like Dinmore.

The size of this year’s kill at Townsville will be in stark contrast with the past two years. The 2014 season produced an all-time record throughput for the plant, while 2015 (an equally bad drought year) would have been similar, except that cattle supply literally ‘ran out’ during the final quarter of the year.

Complex process in plant re-start

Mr Pratt said some ‘ill-informed’ stakeholders this year had suggested that opening a beef plant in a difficult year like 2016 was just a “simple process of issuing a grid to attract some cattle, and away you go.”

“But it’s a lot more complex than that, for all sorts of reasons. For example, due to the length of enforced shutdown this year, many of our employees have either gone off and got part-time jobs, or gone onto welfare benefits. If JBS was to make a decision to re-open Townsville, without any depth of cattle around us, and then have had to close again because we ran out of stock, it would seriously impact our employees,” he said.

“Our workforce would not only be out of a job again, but would have to re-apply for welfare benefits, which can take a month to come through, or go out and try to find another temporary jobs.

“A false-start would significantly impact on our staff, and we felt that was not fair on them, having already been out of work for a long time. That’s a key reason why we’ve had to wait until we knew we had some cattle around us before we could kick-off.”

Mr Pratt said in the current environment it was hard to use the word ‘confident’, but the company felt that based on what it was seeing, there was now a reasonable chance of getting Townsville through a ‘good portion’ of this year.

Beef Central asked Mr Pratt about the popular theory that JBS might have considered closing Townsville for the entire 2016 season, and consolidating that kill at its Rockhampton plant in Central Queensland, in an effort to maintain ‘relatively high’ throughput in at least one plant.

“There are a number of reasons why we did not consider that,” he said.

“We believe there will be enough cattle in that Central Queensland catchment to keep Rockhampton running all year. Secondly, closing a plant longer-term is not a simple thing. Thirdly, the type of cattle being drawn into Townsville do not travel long distances well.

History clearly showed that plants that closed in Australia for any significant period rarely re-open.

“Once that skilled labour force is dispersed, it’s a lot harder to re-open again. We also have a loyal cattle supplier following in the North Queensland region, some of them going back 30 years or more. If we walk away from them because of one bad year, that is not a relationship,” Mr Pratt said.

“JBS spent a considerable sum of money on the Townsville plant during the off-season. That’s not the actions of a company that might have been contemplating a long-term closure.”

“All this means we just have to endure this year, keep those supplier and workforce relationships intact, bunker-down and survive this years as best we can – and hope that there are better days ahead.”

Setting the record straight over local supply issue

Mr Pratt asked for the opportunity to set the record straight on what he saw as mis-reporting in local media last week on a local North Queensland cattle supplier issue.

He suggested an article in the local paper had suggested JBS ‘did not want’ the supplier in question’s cattle.

“Nothing could be further from the truth,” Mr Pratt said. It’s laughable, in the extreme, that somebody would publish a comment suggesting an abattoir that’s desperately looking to gather cattle around it would reject such a supply offer.”

The circumstances surrounded a large cattle supplier north of Charters Towers, a regular JBS supplier, who had a line of 600 steers he was keen to consign for slaughter, with some degree of urgency. He had not at that point booked the cattle in, and Townsville had already filled its kill slots for the first couple of weeks after re-start.

“During our discussions with him, which were completely amicable, he asked us whether, given the size of his consignment (roughly a day’s kill), we could start the plant a day early on Tuesday, March 29 – the first working day after Easter break.”

“We told him that was not possible, which local media reported as a ‘rejection’ of the cattle by JBS.”

“What the writer failed to understand was the fact that re-stating a beef plant after an extended closure like that experienced at Townsville this summer is not just a matter of walking in and turning on the lights. A full working-day is needed to check everything is working, from refrigeration infrastructure to the mechanical chain conveyor system. That often requires replacing faulty bearings or other work before the plant can fire up.”

“For that reason it was just not possible to return to work the day after Easter – despite the strong relationship with the supplier,” Mr Pratt said.

A number of other options were explored, including transporting the livestock to JBS Dinmore at JBS’s expense, but that was ruled out because of the weight of the cattle and associated animal welfare implications in long-distance transport.

At time of reporting, JBS was negotiating with its workforce over the possibility of running a Saturday shift at the end of the first ‘week’ back at work, on Saturday, April 2.

HAVE YOUR SAY

Your email address will not be published.

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.

Comments

  1. Phillip Saunder, 09/03/2016

    It is a pity JBS did not inform their staff at closedown that they would be facing a prolonged shutdown. In fact they gave a tentative start date on the 18th Jan, then they advised a week prior to this start that the new start date was 15th Feb. A week before this date employees were told 29th Feb. All this time there has been no direct contact with employees and employees had to ring or visit the factory.

  2. Richard Wilson, 08/03/2016

    Congratulations again Anthony on presenting JBS’s situation factually for our beef cattle industry’s better understanding with producers and processors working together for beneficial outcomes in difficult trading circumstances.

Get Beef Central's news headlines emailed to you -
FREE!