SFF selling Silverstream plant

17/07/2008

Silver Fern Farms is selling its Silverstream  lamb boning plant.

The plant, which processes and packages lamb products from other Silver Fern Farms plants, is
being acquired by Christchurch-based Scales Corp for an undisclosed price, Silver Fern Farms said in a statement.

Polarcold Stores Limited, which is part of the Scales Corp, will operate the cold stores on the site.

Up to 300 people work at the North Taieri plant in the peak of the season. Workers were called to a meeting this afternoon to be told of the sale.

Silver Fern Farms said the move, which involves a partial leaseback, would result in a “scaling back of certain operations”.

“This will result in a reduction in permanent staff required on the site and will also mean the company will be looking for a lower number of replacement process workers in the coming season,” the statement said.

This is a blow to the workers and the Dunedin community. It comes on top of other recent large scale job losses including 138 at SFF’s Burnside venison plant.


Two works down…

19/05/2008

There are no surprises in today’s announcement that PPCS is closing its Burnside venison plant in Dunedin with the loss of 138 jobs.

 

The age of the plant was one of the factors counting against it and PP chief executive Keith Cooper said it had been losing millions of dollars.

“Tightening New Zealand and European food safety regulations make the continued operation of export meat processing facilities at Burnside increasingly problematic as all areas on site, even those not used for food processing, must be maintained to specified standards,” Mr Cooper said.

“In addition, the modern blast freezers used for venison processing require a large section of now-obsolete conventional cold storage to be frozen down, which incurs significant ongoing electricity costs.”

Mr Cooper said sheep and lamb numbers were expected to drop by two million in the South Island next year and national deer numbers were forecast to drop from 736,000 to around 500,000.

“The forecast seriously impacts on the ongoing viability of the venison and (lamb and deer) skin processing operations at Burnside,” he said.

It’s been a horror month for employment in Dunedin with 430 jobs lost through Fisher and Paykal’s closure of its Mosgiel plant and a further 50 jobs lost with the closure of Tamahine knitwear.  

The announcement will also be making staff at other freezing works nervous. PP announced the closure of its Orinigi works with the loss of 446 jobs last week  and there may be more to come.

Owen Hembry points out that PP with 24 plants, including Orinigi, has as many plants as Alliance with 8,  Affco (10) and ANZCo Foods (7) combined.

In fact Alliance and Affco, which has previously restructured, have both said they have no plans to rationalise.

So the pain is going to fall mainly on PPCS but as the saying goes, no pain no gain – and what comes out the other end will undoubtedly be a leaner, fitter company.

The cost of redundancies at Oringi – which employs 466 people with an opportunity for about 100 to be relocated within the company – will be about $14 million to $15 million with operating cost savings of about $15 million a year.

A fitter PPCS will have another card to play – a good geographic and product spread.

One of the reasons Alliance didn’t want to merge with PP was the overcapacity of PP works. These closures will change that, but PP may also feel that having bitten the bullet it is in the best interests of the company to continue on its own.


Sheep numbers down but prices may go up

17/05/2008

The ODT reports that 120 meat workers at PPCS’s Burnside works have been called to a meeting on Monday. The expectation is they’ll be told that the venison processing will move to the Finegand plant in South Otago. This follows  last Monday’s news that the company’s Oringi works will close. 

 

In between the two announcements was another from Mataura Valley, a new dairy company, saying it plans to build a $90 million milk drying plant near Gore. Reactions were mixed with a warning that too many companies competing for markets could lead to prices being under cut as they have been in the sheep industry.

 

However, farmers facing the expense of converting to dairying will be tempted by the fact they don’t have to buy shares as they do with Fonterra; and the increase in cow numbers is expected to continue. Around 100 Southland sheep and beef farms converted to dairying for the new season and a similar number is predicted to convert for the 2008-09 season.

 

The scale of conversion has altered the South Island landscape. Visitors used to marvel at the number of sheep, but while driving from North Otago to Balfour a couple of weeks ago what struck me was how few sheep I saw. My impression was confirmed by yesterday’s release of 2007 stock numbers from the Stats Department which explain why meat works are closing and milk plants are opening.

 

Last year’s drought and numerous dairy conversions have led to a 3% drop in sheep numbers from 39.6 million in 2002 to 38.5 million last year. North Island sheep numbers dropped 5%: from 19.5 million in June 2006 to 18.5 million last year – just 100,000 more than in 2002.

 

The South Island still has more sheep than the North, but the numbers have decreased more too: there were 19.9 million last year, 6% fewer than 2002. The decline was steepest in Canterbury where they dropped 8% to 7.2 million and Southland down 5% to 5.7 million.

 

Beef numbers dropped 2% from 4.5 million to 4.4 million in the five years to June 2007. At the same time dairy cows increased 31% in the South Island, from 1 million to 1.3 million with a small increase of just 22,000 to 2.9 million in the North Island.

 

The drop in sheep numbers signals there may well be hard times ahead for meat workers and their communities as over capacity forces PP and possibly other companies to “right-size”. But there are encouraging signs for meat producers. We’re not the only country with a decline in sheep numbers. The drought has taken its toll on flocks across the Tasman too so the supply is down while the world demand for protein is growing. Beef prices are already at record highs in the USA; and the falling dollar will also help boost prices, not just for meat. Pelts and wool have been at rock bottom levels so even a small lift in returns from them will help farmers’ incomes too.

 

 


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