SEQ chicken meat plant closure has wide ranging implications

The shock announcement by Baiada (‘Steggles’) to close its Ipswich processing facility last week was a devastating blow for farmers, the industry and the communities they support. The sudden decision will also have much broader implications.

Overall, the jobs losses will be substantial. When you consider manufacturing, on-farm and associated support jobs, the total number will be well over 400.

With unemployment in Ipswich alone currently at 8 per cent, the gravity of these job losses cannot be underestimated.

While the impact felt by those directly employed by the plant will be swift and difficult, the real losers are the chicken farmers who are effectively contractually wedded to the fate of the processing facility.

The future for 26 profitable farm businesses is now uncertain. These farmers are operating 155 purpose-built poultry houses on 28 farms and employing more than 80 workers within the SEQ region. QFF industry member the Queensland Chicken Growers’ Association (QCGA) conservatively estimates the financial losses on their farms to be at least $150 million.

Unlike other animal production industries, the degree of vertical integration in the chicken meat industry means that farmers do not own the birds they grow, the processors do. This system provides a guaranteed price for the birds once benchmarks are met; however, it gears the system in a way that dictates that farmers can only supply chickens to a processor through an agreed contract to grow and deliver the processor’s birds.

To put it simply, if you do not have a contract to grow birds, then you do not have any birds, and therefore no income at all.

The industry has high capital investment requirements. The average chicken farmer operates six poultry houses, valued at around $1 million each. Farming systems and infrastructure have continually been upgraded and expanded, based on the strength of and assurances from a growing Australian chicken meat industry.

The Baiada contracted farmers are no exception, and many of them have significant amounts of debt on their farms. Without an income from growing chickens, these farms with purpose-built facilities will be bankrupt, or at the very least will see the value of their farms decimated.

The viability of the SEQ farmers and their compliance with industry standards and expectations is unquestionable. Concerningly, the Baiada decision is based on business consolidation and greater concentration of its NSW operations (at the expense of its Queensland operations) to cut costs and increase the company’s competitive advantage in a domestic market dominated by a few players.

In an industry that has allowed its product to be devalued to a point of commodification, questions around consumer education, the value of locally grown food and corporate social responsibility must be asked. The industry, retailers and consumers have all played their part in the failure to properly value the true cost of food at the expense of farmers.

While it is not clear what the future has in store for the farmers impacted by this decision, it is essential that the State Government considers what role it will play and assistance it may offer for the farmers who have a lot more than just their job on the line.

QFF will be working alongside QCGA to ensure this happens and will work with all parties to realise a positive way forward.