Processors strap in for tough end to year

The sector’s view, in fact, is that trading conditions will be harsh for the next 18 months.

For that reason, it’s high time more attention was paid to the constraints faced by the industry, according to the chairman of a producer-owned abattoir in Casino.

The Northern Co-operative Meat Company’s John Seccombe gave a candid outline at the Yulgilbar Beef Expo and Forum on Friday of just how big a challenge the likes of non-tariff barriers to trade and government influences - both here and overseas - posed.

Expect more of the short term plant closures between here and Christmas, he said.

“The NCMC is looking to close down at the end of September for a week - the cattle just aren’t coming through,” Mr Seccombe told the 500-odd producers who turned up at the Myer family’s Santa Gertrudis property west of Grafton for the event.

Red meat processing was a significant employee and a very big contributor to the economy and it was also now the largest trade exposed manufacturing industry in the country, Mr Seccombe pointed out.

“Beef processing is a traditionally high overhead, low margin business,” he said.

“You have to keep your hooks full, that’s the nature of business.

“At the moment, at NCMC we are running four or five out of ten hooks empty, so we’re not travelling terribly well.”

But it’s not just supply constraints inflicting pain at the moment.

The fact processing is so labour and capital intensive creates big hurdles.

At the Casino plant, labour accounts for 60 to 70 per cent of overall costs.

“We’re bound by national wages expectations, not like some of our competitors,” Mr Seccombe said.

Innovation in robotics may play a role in offsetting some of the those costs in the future, he acknowledged.

“Due to the age of plants around the countryside, maintenance costs are very high,” he said.

“Not many new plants have been built in last ten to 15 years but plenty have closed.”

The high cost of energy was also wreaking havoc.

With freezers and coolrooms running 24/7 at the NCMC, energy represents more than 5pc of costs.

Mr Seccombe believes meat processors should be taken off the grid.

“Most abattoirs are in regional areas and generally the most dominant power user in their area,” he said.

“Taking them off the grid solves a couple of issues: it allows for more reliable power to the  community and it reduces one of our major costs.”

However, it was non-tariff barriers to trade and government policy that came under the strongest attack from Mr Seccombe.

It was something the industry as a whole bore the “enormous costs” of, he said.

As an example, he discussed US president Trump’s decision to move back to coal dependency, which had led to a drop in the price of palm oil which is used in renewable energy in the States.

Tallow prices are directly related to the price of palm oil, with the US a big end user of Australian tallow.

Our tallow prices have dropped from $900 to $600 a tonne in recent months.

That adds up to $100,000 off the NCMC’s bottom line per month, Mr Seccombe revealed.

“This is an example of government policy influencing us in a big way without any input at all from us,” he said.

Non-tariff, or technical, barriers to trade - the likes of big demands on shelf life and accreditation - were delaying the benefits the beef industry had achieved from the negotiation of Free Trade Agreements, according to Mr Seccombe.