No chance government will legislate to restrict meat capacity

After the announcement last week of Alliance Group’s intention to close sheepmeat processing at its Mataura plant, union representative Gary Davis called for the government to intervene. This was no doubt caused more by frustration over the loss of jobs than any realistic expectation that the government would interfere in a commercial situation.

Alliance has made a business decision based on declining sheep numbers, brought about largely by land use change to dairy. The South Island’s share of national dairy production continues to increase every year with the result that more beef processing is needed at the expense of sheep chains. Hence Alliance took the logical decision to retain beef processing at Mataura and to transfer sheepmeat to Lorneville.

Listening to statements by Davis and Meat Workers Union president Graham Cooke, one would think the meat industry, particularly in the south, had been engaging in rampant capacity expansion. But realistically there hasn’t been much new capacity introduced apart from small units; in contrast Silver Fern Farms ended sheepmeat processing at its Belfast, Christchurch plant in 2010.

What tends to happen is that individual processors make decisions to tweak, increase or close capacity based on predicted throughput which inevitably is not static, but changes in direct proportion to farm profitability.

Comments by the union about the illogical behaviour of companies should be taken with a pinch of salt. Although to the average observer meat industry behaviour may sometimes seem to fly in the face of reality, each decision has its own logic. At the micro level every new investment can be justified, as long as it improves efficiency and takes forecast livestock volumes into account. Efficiency improvements will always have a competitive impact and may result in job loss at one plant or another.

Ever since the short lived Meat Industry Authority was established in 1976 to control the licensing of plants, taking into account the economic need in the context of national efficiency, processing capacity has presented an eternal problem. But before this, new developments were almost unheard of and the industry consisted of a host of ageing facilities which operated on a single shift to process the available livestock, mainly lambs.

Subsidies ensured sheep were retained in huge numbers, resulting in a sheep flock of more than 70 million. This has now declined to just over 31 million. The landscape has changed so much in the last 35 years that the old meat plants and work practices are totally inappropriate today. Today New Zealand’s meat exports must comply with the needs of increasingly sophisticated global markets from the perspectives of food safety and presentation.

The sad fact arising from industry change of the nature announced by Alliance is that there is always a human cost. In this case 325 jobs will disappear in Mataura, although a number of those will be available at the Lorneville plant outside Invercargill.

The union may rail against an employer which takes these decisions, but it should really assist the process of rationalisation, because the alternative would be worse. If Alliance doesn’t act promptly, its overall performance would deteriorate further with greater job losses in the future.

The meat industry has been such a high profile part of New Zealand’s economy for over 100 years and every plant closure affects its community disproportionately. But inevitably the industry will continue to evolve and almost certainly this will require less, not more workers. This is a fact of life and should be welcomed as evidence of adjustment to meet market demands. Unfortunately there will always be a short term human cost.

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5 Responses to “No chance government will legislate to restrict meat capacity”

  1. Rural round-up « Homepaddock Says:

    […] No chance government will legislate to restrict meat capacity – Allan Barber […]

  2. No chance government will legislate to restrict meat capacity | It's MeatExportNZ Says:

    […] Read more … Share this:EmailPrintMoreDiggShare on Tumblr Pin It This entry was posted in In The Office and tagged Allan Barber, Alliance, Gary Davies, government, Mataura, meat industry, Meat Workers Union by Editor. Bookmark the permalink. […]

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