Canterbury Agricultural Restructuring Continues

The Canterbury Plant, Silver Fern Farms’ meat works in Belfast, Christchurch is to close with the loss of 250 jobs. While some workers may get 70 jobs elsewhere in Silver Fern Farm’s operations, the net loss of jobs is symptomatic of the decline in the New Zealand sheep meat industry in recent decades.

A complex mix of factors has contributed to the decline: the removal of farm subsidies in the mid 1980s, a shift in consumer demand away from lamb & mutton as well as the complementary product, wool, high interest rates and an appreciating Kiwi dollar. Between 1990 and 2005, sheep, cattle, and wool output dropped by an average of over 0.5 percent per year, while dairy output expanded by an average 5.3 percent per average.

Sheep numbers in New Zealand have fallen 45 percent over the past 25 years, from a record 70 million in 1982 to 38.5 million in 2007.

In Canterbury, the province that acts as the hinterland for livestock supplies to the Belfast plant, there has been a pronounced shift from sheep & cattle farming to dairying in the past decade or so reflecting the relative profitability of the respective farming enterprises.

Strong international demand for dairy products, reflected in escalating export prices in the last few years, and the availability of irrigated pasture in Canterbury at cheaper land prices than in historically important dairying districts of the North Island have contributed to the “stampede” of cows to the South Island. (Or more accurately, the “land rush” of dairy farmers).

Higher land prices have exacerbated the problems of Canterbury sheep & cattle farmers trying to return to profitability. Increased competition for land use has also come from the rapidly expanding wine industry as vineyards have supplanted traditional sheep & cattle farming.

Sheep numbers in Canterbury fell 7.6 percent between 2002 and 2007, while in the same five years, dairy cattle numbers grew by almost 40 percent. Sheep and lamb numbers are estimated to drop by a further 2.2 million livestock units in the coming year.

The area planted in wine grapes in Canterbury grew by 125 percent over the same period to encompass an area of almost 1700 hectares, a relatively modest area compared to some 70,000 hectares in wheat and barley, but nonetheless a source of upward pressure on land prices in the province.

The influx of dairying into Canterbury has not been without its problems. Increased demand for water is highlighting the scarcity of water on the Canterbury Plains as well as the efficiency and effectiveness of the current water rights regime. There is also rising concern about the effect of increased dairy effluent and artificial fertilizers on Canterbury waterways and aquifers. It is likely this concern over runoff will result in higher costs for dairy effluent treatment.

Meantime, the meat processing industry continues to downsize, something that many Belfast workers anticipated over recent years. Substantial meat work closures and corporate consolidations occurred in the industry in the late 1980s into the 1990s. There is mounting pressure for the two major South Island producer cooperatives, Alliance and PGG Wrightson, to re-engage in merger talks that might further consolidate meat processing capacity in the South Island.

This may be small comfort to many of the workers laid off at Belfast. Many are older workers over the age of 50 who have worked at the plant for much of their careers. Their prospects for alternative employment, with a skill set no longer much in demand, in a rapidly slowing economy are likely to be slim.