Proposed closure of Timaru meatworks 'pretty foreboding' - minister

Minister for Rural Communities Mark Patterson says a proposal to close the Alliance Group's Smithfield meatworks is "pretty foreboding" for Timaru and the surrounding districts, given Smithfield is a significant employer with a long history in the area.

"It's really concerning, it's a wake-up call, we as a government have got to take this seriously."

Patterson said it was well known within the industry that there was surplus processing capacity in the industry so the announcement was not a complete surprise.

"There's a million less lambs out there this year, it's been coming in some regards it is just where it was going to happen and it looks like the poor people of Timaru and the workers at Smithfield are the ones that have copped it."

He said it all came back to a change in land use, largely due to increasing afforestation.

Research from Beef + Lamb in 2022 found farms were being converted into carbon forests at "alarming rates".

In 2017, 7000 hectares of sheep and beef farmland was sold with the intention of being converted into forestry. That had increased 36 percent two years later, with more than 52,000 hectares of farmland purchased by forestry interests in 2021.

Patterson said the government had plans to introduce restrictions on afforestation to address this.

"We need a balance in our rural communities and it had swung too far with the carbon price creeping up, we do not want to see more of this we do not want to see the de-industrialisation of New Zealand."

The news came on the back of Winstone Pulp International's mill closures, other major industries being under pressure and increasing energy prices.

"We've really got to get our arms around this because we don't want to see regional New Zealand hollowed out."

He said the proposed closure was not only sad for the workers but the wider community including Alliance's farmer-shareholders.

"As a co-operative it is one big family so we will all be feeling it today, including myself actually as a shareholder as well."

'Very tough day' for impacted staff

Alliance Group chairperson Mark Wynne said the impact on the community was huge.

"Look a very tough day particularly for the impacted staff who've been very loyal to the company and of course the community impact that will have going forward ... so yeah, a very tough day all around."

The Smithfield site employs roughly 600 staff, he said.

"We advised them today that our proposal is that we close the Smithfield site and we will go through consultation with them over the next few weeks."

In the short-term the plant would keep running the deer processing day shift until towards the end of this year, he said.

"But ultimately that will close once we've made alternative arrangements," he said.

"For the majority of the staff we'll work with them to try and find alternative employment but in terms of alternatives inside Alliance we have very few openings available and therefore it will be a very bad outcome."

The main reason for the proposed closure was a decline in livestock, particularly sheep, he said.

"This is not a new trend, it's been going for quite some time, New Zealand used to be famous for you know 60 million sheep ... and right now we're down to 23m and forecast based on beef and lamb figures we're talking about another 900,000-type decline next year.

"So when you have a processing plant and it is a big site, lots of employees, you need the livestock to be flying through the plant for processing otherwise it's a very very high and very expensive capital investment."

Alliance had a very big loss in 2023 after lamb prices in China, which is New Zealand's biggest lamb export market, fell 25 percent, he said.

Lamb prices in China have dropped a further 10 percent in 2024, he said.

Forestry and carbon policies were having a major impact on farming and it had seen hundreds of thousands of hectares of land converted from sheep and beef farming into permanent forestry with the trend set to continue, although at a slightly slower rate, he said.

"The feedback that was given when the forestry policies were put in place for carbon farming there was lots of feedback that this will have a significant impact on livestock farming which in turn will have a significant unfavourable impact on the rural communities and here we are, it is playing out."

Forestry would continue to have a massive impact on farming until the forestry policy settings were changed, he said.

Wynne said that 95 percent of New Zealand's red meat was exported.

"So the demand profile and the price that is realised in the offshore markets really determines the economic performance back on farm and a sheep or a lamb ... is a dual purpose animal it has wool and meat - wool has been in the doledrums for a very long time. So if we come to the meat which is where Alliance is involved the commodity cycle we have been going down through price for the last two years."

Fed Farmers blames change in land use for proposed closure

Federated Farmers says land use change is to blame for the proposed closure of the Timaru meatworks.

Meat and wool chairperson Toby Williams said the prospect of the139-year-old Smithfield plant closing and the loss of such a major employer in Timaru, was a huge blow to South Canterbury.

The proposed closure was a symptom of broader issues that would continue to undermine the primary sector until they were addressed, he said.

Williams said for the last decade, policy had favoured forestry over farming and incentivised planting pine trees for carbon revenue.

"On top of that, excessive red tape and layers of impractical and poorly consulted-on regulation have strangled farming confidence and investment."

This year's stock count showed sheep numbers slumped by another million or so in the last year, to 23 million.

"Federated Farmers had always highlighted that when poor regulations stifle farming, the impacts were felt throughout our rural communities and broader national economy.

"This is sadly coming to play today, and it is the people of South Canterbury who will feel this the hardest."