Just weeks after finalising the purchase of a rice mill in Vietnam, southern NSW-based SunRice is preparing to mothball half its milling operations at Deniliquin and cut more processing operations during 2019.
Drought and the prospect of the second smallest Australian rice crop in 12 years have forced the national rice marketer to flag almost 100 job cuts, plus reduced working hours at its milling, packing and warehouse operations.
The company normally employs about 600 regular staff in the Riverina, plus up to 300 more at harvest.
While this summer’s Riverina rice crop won’t be anywhere as tiny as the 19,000 tonnes harvested in 2008 during the millennium drought, plantings have been restricted by limited irrigation water allocations and high prices.
Chairman, Laurie Arthur, said SunRice was staying commercially careful about releasing yield forecasts for 2019, but volumes would be well below this year’s 620,000t crop.
His own Murray Valley farm was growing just 98 hectares this season.
To brace for the slump a staged reconfiguration of milling operations began this week, while the company is also cranking up its processing and supply chain activities overseas to cover the Australian export shortfall.
Flexibility is something we all have to accept
The 24-hour running time at Deniliquin’s Mill Two will drop to five days a week next month, and Mill One will wind back to 16 hours, five days a week on January 31, then stop operating in April.
Normally the big Deniliquin site, the southern hemisphere’s biggest rice milling plant, handles up to 450,000t a year.
By July it will likely be operating just 40 hours a week, while SunRice’s 350,000t capacity Leeton Mill will cut back production to five days a week in April.
Although carry-over grain stocks from 2018 would maintain the reduced milling throughput next year, the company’s big export operation would increasingly rely on rice grown and processed in Vietnam, the US and other overseas production zones.
Last month SunRice took over a 260,000t (dry paddy) capacity rice mill in Vietnam’s Dong Thap Province, where it already sources contract-grown medium and long grain crops to support sales orders, particularly from the Pacific.
The company has not disclosed the purchase price, but spent about a year considering several sites before signing the deal.
It also has a 100,000t capacity mill in Sacramento, California, and milling and packing plants in Jordan and Papua New Guinea.
Vietnam has grown rapidly as a source of grain in the past two years.
SunRice is now an established player in the Mekong Delta, handling more than five per cent of all Vietnamese rice exports.
More than half of Vietnam’s Japonica style rice exports are grown under specific quality standards for SunRice markets.
The company has signed memoranda of understanding with two Mekong Delta provincial governments to source sustainably grown rice tailored for Australian end market requirements, with farmers eventually growing patented rice varieties bred specifically for SunRice.
Mr Arthur said new equipment was being installed to increase polishing capacity and expand the mill and packing lines.
Testing drought experiences of last decade had forced the Australian rice industry to be more savvy and flexible about maintaining supplies and consistent quality to its mostly high value customer-base.
The US SunFoods division, established by SunRice during the last drought, would again be contributing supplies to maintain valued customer ties.
As global food markets evolved SunRice would need more sustainable supply chains overseas to respond to rising demand for its products, particularly if the Riverina experienced more low production years.
At home the company was urging local growers to think strategically and plan more than a season ahead for their water needs, while adding more grain carry-over flexibility into its own processing capacity.
“Flexibility is something we all have to accept,” Mr Arthur said.
Production from North Queensland was also on a long-term rise as varietal and production research provided increasing opportunities for farmers to grow rice instead of relying on sugar cane.
SunRice remained firmly committed to the Riverina region as a source of premium quality rice, but had been forced to implement its latest operation cuts after an extensive review of the production outlook.
“This season is very dry, but based on bigger picture trends I don’t expect conditions to stay dry for long,” he said.
“When I started growing rice our biggest concern was flooding.”
SunRice was concerned about losing valuable skills and staff when forced to scale back its operations and was therefore exploring all available options with employees and unions to retain as many people as possible, including re-locating staff and job sharing.
Meanwhile, in the wake of SunRice’s restructuring move an angry Rice Growers Association of Australia (RGA) has reiterated its criticism of the government imposed recovery of an extra 450 gigalitres of water, further restricting productive irrigation activity in the Murrumbidgee and Murray valleys.
It noted the Murray-Darling Basin water reform agenda was not supposed to destroy industries and communities relying on irrigated crops.
President, Jeremy Morton, said while the drought was a significant factor, the Basin Plan was undoubtedly responsible for some of these SunRice staff losing their jobs.
Murray Darling Basin Ministerial Council (MinCo) of State and Federal Water Ministers was meeting next week to decide on future water recovery throughout the Basin Plan.
“A decision at MinCo to further reduce the amount of water available for producing food and fibre means more people without a job, fewer jobs across our entire community and the nation,” he said.
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