Meat processing capacity has been relatively stable for a couple of decades, so there will be much interest in news this week that up to 75 meat workers in Oamaru could lose their jobs.
Despite the continual erosion of sheep numbers in particular, there hasn’t been a corresponding reduction in processing capacity due in part to productivity improvements.
But as BX Foods, also known as Oamaru Meats, has found, the decline in stock numbers is starting to bite.
The company is not speaking publicly but the New Zealand Meat Workers Union says that a shortage of stock is behind the staff layoffs.
The last export plant to close was Silver Fern Farms when it shut its Fairton works near Ashburton in May 2017 with the loss of 370 jobs.
At the time SFF noted that in 2010 Fairton had processed more than 1 million lambs but by 2016 that had halved, and had then fallen further, to 325,000 lambs in 2017.
The regions are littered with closed plants, but three periods stand out for the size and scale of the closures.
In the late 1980s the exit of Waitaki International meant the closure of Islington and Burnside and in 1991 Ocean Beach and Kaiapoi closed while Mataura and Makarewa were scaled back.
In 1994 the collapse of Weddel took out plants in Tomoana, Feilding, Aotearoa, Whangārei and Kaiti.
There were subsequent chain closures, but for much of the past 20 years productivity gains and shifting supply patterns to a more year-round flow have provided some insulation amid the continual decline in animal numbers.
Then forestry companies started shopping for land.
Since 2017 an estimated 175,000 hectares of sheep and beef farmland has been planted in trees, with Beef + Lamb NZ calculating this has removed about 1 million stock units, primarily breeding ewes and cows.
Estimates of breeding ewes are that they have fallen from 17.1 million in 2018 to 14.8 million last year, and beef cows and heifers from 1 million to 989,000 over the same period.
NZ breeding ewe numbers are now comparable with those in the United Kingdom.
Compared to four seasons ago, the annual lamb kill has declined by about 1 million, a not insignificant number that must impact processing capacity.
The challenge is how they will respond and which company will move first.
The social and emotional issues of people losing their jobs aside, plant closures are also costly and the loss of geographic advantage is another factor to be considered.
Land use change is driven by economic considerations: willing seller, willing buyer and an assessment of the best returns on investment.
But as we have seen this year, it can have unintended consequences.
Lower lamb numbers and weak pricing earlier in the season have disrupted the normal winter prime stock flow, with the lamb kill down 30-40% compared to last year.
Ominously, NZ’s erosion of lamb numbers could see us lose to Australia our influential position as it becomes the dominant supplier to many markets.
For decades NZ has been the market leader by virtue of the volumes exported, but Australia has now overtaken us and we could be exposed more to the pressures of Australian pricing.
Economic reality can be cruel but you cannot argue with basic arithmetic, and that is the brutal truth facing the meat industry.
In Focus Podcast | Meat processors take stock as flock numbers fall
Senior reporter Neal Wallace says there are big challenges ahead for the red meat sector as it grapples with lower stock numbers and over-capacity. One processor in Oamaru has already laid off staff and Neal says there may be more rationalisation to come.
He also discusses the ongoing push to get more rural GPs trained and working in our communities.