Tough times for meat processors battling trade restrictions and record livestock prices

Record livestock prices are forcing some abattoirs in New South Wales to cancel shifts or shut down operations in the short term.

JBS shut down its plant in Scone last Friday due to a shortage of livestock while Southern Meats in Goulburn has shut down its plant this week.

The Eastern Young Cattle Indicator (EYCI) hit a record high this week as rainfall around New South Wales and Queensland encouraged producers to hang on to their livestock.

The price of young cattle has doubled in the first two months of 2020 and while a record number of cows and heifers were processed last year slaughter rates are now slowing down significantly.

That is creating big problems for the red meat industry and the peak body is now calling for cuts to government charges to help keep the abattoirs running.

Tough time for sheep meat sector as well

Trade lamb prices have also surged 25 per cent this year and are now threatening the $10/kg barrier.

The sharp rise forced Southern Meats Group to shut down its abattoir in Goulburn this week.

CEO Coll MacRury said it was a short-term strategy to help manage costs and avoid them running at a loss.

Southern Meats will be operating with limited kills next week but the outlook is likely to get even harder for sheep processors.

Rural Bank is forecasting a 45 per cent drop in the slaughter rate heading into winter as producers hang on to their livestock to re-build the flock after the long drought.

Mr MacRury confirmed the company’s other in Western Australia WAMMCO would continue to operate at this stage.

Job losses

With some abattoirs cutting back shifts or closing abattoirs short term, it is possible that casuals in the industry may lose their jobs.

Patrick Hutchinson, the CEO of the Australian Meat Industry Council, said that would be a big hit to regional economies as the sector employs 40,000 people directly.

“They may go to shutting down completely, they may go to three days a week, or two shifts to one shift, there’s a number of levers they can pull.”

He said processors will be cautious about longer shut downs as it can take a long time to get back up to speed again.

Call for government assistance for meat industry

Patrick Hutchinson is calling for relief from Federal Government charges as well as cuts to State Government payroll taxes.

“We pay about a $100m in export certification fees and on a state base level, what about payroll tax exemption over a two-year period?”

“That could save a medium-sized abattoir $1m a year,” he said.

Mr Hutchinson warned of the consequences for the broader economy if meat processors, Australia’s biggest agricultural industry, experienced a downturn.

High prices and short supply of livestock were not the only problems facing the abattoirs.

The outbreak of coronavirus has led to a downturn in the chilled export beef market, according to one business operator in southern NSW.

Monbeef in Cooma supplies boxed beef throughout Australia and to 26 other countries.

Plant manager John Hill said demand had dropped off due to movement restrictions in China and refrigerated and freezer containers were also stuck there.

“We now have to pre-book shipping containers three and four weeks in advance,” he said.

“It means we have to plan for the quantities of product down to the last box, or we lose our spot on the vessels.”

Prices have also softened, he said, but the reduced demand from China may only be temporary.

Analysts from Rural Bank estimate that the shortage in protein in China caused by the massive cull of pigs due to the outbreak of African swine fever will probably result in that country importing large volumes of beef instead.

While the coronavirus is affecting exports and record prices in Australia is making it tough to source livestock, John Hill said Monbeef in Cooma would stay open.

“I think the one thing in our advantage is we are a small plant and we firmly believe we’ll be able to source enough cattle to keep up production.”

“The big priority, is keeping cattle in front of my staff, so we are in production as many days as possible.”

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