JBS Australia will temporarily close a second southern lamb processing plant this week, and plans to extend the current closure at the company’s Longford, Tasmania lamb chain by an additional month.
The company’s Cobram lamb facility on the Murray River west of Melbourne will close for four weeks, with last kills scheduled for yesterday, March 16. The plant’s 290 staff, and unions, were informed of the decision this morning.
Cobram can process up to 3200 grass and grain-fed lambs a day, as well as hogget and mutton.
The Cobram decision follows a JBS announcement last month that the company’s Longford lamb chain would close for four weeks, due to livestock supply challenges. That decision did not affect Longford’s beef chain, which continues to operate. The Longford lamb closure has now been extended by four weeks.
While JBS does periodically have short seasonal maintenance shutdowns at this time of year in its southern operations, the Cobram closure is a stand-down, consistent with the plant’s Enterprise Agreement with staff.
Both the Cobram closure, and that at Longford – which is technically a temporary closure, rather than a staff stand-down – will be reviewed in another four weeks, staff were told. A re-opening at both facilities will be examined for week commencing April 24, Beef Central understands.
“We will continue to keep the workforce aware of developments, as they occur,” JBS director John Berry said this morning.
Tight supplies and high livestock prices continue to erode processing margins across eastern Australia, with a string of beef and lamb plant closures announced since the start of the year.
In addition to the two JBS plants now temporarily closed, Manildra Meat Co, Cootamundra, Southern Meats’ Goulburn, NSW, and Shark Lake meatworks near Esperance, WA, have temporarily or permanently closed, citing extreme livestock prices and procurement as the cause. Victoria’s McGillvray abattoir in Gunbower closed last week after more than 60 years of operations.
“As a company we did not take this decision lightly, we just had a situation where supply has tightened significantly,” Mr Berry said. “We’ve seen a decline in livestock supply across the east coast of Australia over the last 12 months, leading to a number of closures and significant cut-backs.”
Mr Berry said the JBS team has worked hard in southern Australia to continue to maintain production through its Longford and Cobram plants.
“Unfortunately we’ve hit the wall in terms of supply, and these decisions, as difficult as they are, are in the best interests of the business and the workforce in the long-term.”
JBS will continue to process lamb for its Great Southern brand program at the company’s Brooklyn plant near Melbourne.
“From a buy, make and sell perspective, the market is strong and we as a processor can’t control the international market nor the currency,” Mr Berry said earlier.
He said the animal protein industry was highly competitive in Australia and internationally. But Australian and state governments needed to understand that operational costs – whether it be energy or general regulatory costs – play a significant part in the Australian processing sector’s competitiveness against American, Brazilian and New Zealand processors.
Speaking after the earlier Longford closure, Mr Berry said while strong livestock prices were good for producers, at the same time, there had to be a much better understanding within the industry at state and federal government levels that the current model was not sustainable in its current form, unless stakeholders were able to start taking cost out of the processing business and importantly, continuing to gain competitive market access internationally.
An example of that was the timeframe it had taken to finalise an expansion of chilled market for beef and lamb to China.
“China’s not the silver bullet, but it is an example of how the government needs to be working with industry to convert these into real opportunities for the Australian red meat sector,” he said.
Speaking during the recent lamb global markets outlook in Melbourne, Australian Meat Industry Council processor general manager Patrick Hutchinson said the sheepmeat industry could expect to see reduced lamb processing capacity across the industry later this year.
In addition to high livestock prices, energy costs, labour costs, and red tape associated with the cost of compliance were all weighing the industry down, he said.
Tight sheep supply and the high level of competition for a dwindling resource have seen the respective restocker and light lamb indicators averaged 145c/kg and 101c/kg higher, year-on-year, the Melbourne global markets forum heard. Trade and heavy lamb indicators have also trended above year-ago levels so far in 2017, up 69c and 52c, respectively.
Prices are forecast to hit record average levels in winter for mutton and lamb, according to MLA, on the back of a supply shortfall which has been amplified by the current restocking movement.