King Island

Updated 28th Dec. 2013. King Island is located in Bass Strait off the North western tip of Tasmania, midway between Tasmania and Victoria. It is approximately an area of 1098km². Abattoir is currently closed

Current Operation

• Closed September 2012¹

Location

      

Source – Hema Maps. Australia Truckies Atlas     

Owner

• JBS (Australian subsidiary)(2008), operates 11 facilities in Australia, world’s biggest meat producer – chief Executive Andre Nogueira⁴
  • JBS operates another plant on Tasmania mainland – Longford abattoir (Tas)⁹
  • also own and operate Devonport (Tas)²⁰.( not yet added to blog)

 Operation

• 70workers²
• 100 Workers¹
• 105 workers, Island only has population less than 2000⁴
• Could process 800 head a week⁷
• “JBS Australia’s facility is the only meat processing plant on the island and production is only limited by the availability of animals” JBS website accessed 13.11.2013.¹³
• Daily processing capacity – 180 head¹³

 Source – Tasmania Times Article ‘States $12M fails to save abattoir’ 10.09.2012
King Island abattoir facilities – photo 2012.

History

2002

• SBA Foods sell to Tasman Group Services – $25M³⁴
  • Includes King Island³⁴
  • Altona abattoir – Melbourne (currently mothballed) – been closed for last 2 years³⁴
    • Past 4 years had $10M spent on improving beef slaughter chain, chiller and boning facilities³⁴
  • Yambinya feedlot – Wakool, Deniliquin.³⁴
  • Tasman Group already owned – Brooklyn abattoir – gutted by fire June 2001 and still closed in 2002.³⁴

2003

• October. King Island receive 600 head from Tasmanian feedlot³²
  • King Island currently only operating 3 days week³²

2005

• King Island Industrial agreement 2005 registered (T12142 of 2005)³⁸
  • AMIEU Tasmania branch/Tasman Group Services trading as King Island abattoir compass recruitment³⁸

2007

• AC Nielson Poll showed King Island brand logo was the most recognised beef brand in Australia¹⁵

Source – www.kingisland.net.au. Logo as used currently, sourced 28.12.13.

2008

• JBS Purchase⁷
  • Asset purchase included brand identity ‘King Island beef’¹⁵
• JBS purchased as part of Tasman group when entered Australia with acquitsition of AMH¹⁹
  • Tasman Group consists of abattoirs in Tasmania – Longford, Devonport and King Island³³
    • Tasman group 3 abattoirs in Tasmania including King Island and 3 in Victoria.³³
    • JBS paid $US150M³³
  • JBS also purchased Smithfield Group $US565M³³
    • Has four abattoirs³³
  • JB also purchase National Beef $US560M³³
    • Has three abattoirs³³
    • 2 meat processing facilities³³

2009

• April.Closed for one week, 100 workers stood down without pay⁵
  • Producers not informed of closure until it actually happened³⁵
    • Some producers had only ever sold every animal they produced to abattoir for last 20 years³⁵
    • some producers selling culls to abattoir but better quality to competitors – Some received $180 more delivered at feedlot on mainland Tasmania than at abattoir on King Island³⁵
    • King Island abattoir wasn’t always getting premium meat going through³⁵
    • Competition from buyers supports prices but too many cattle leaving island undermines abattoir.³⁵
• JBS citing structural issues with factory and yield issues³⁵
  • Power on King Island is twice price as mainland Tasmania and 3 times price in Melbourne³⁵
    • Power was costing 25c/kw hour³⁷
    • Government had installed renewable energy project on King Island $45M – covered two thirds of Islands power needs.³⁷
  • Effluent disposal needs to be improved³⁵
    • King Island is only recouping $35 per head offal, other plants $70-$80³⁵
  • freight subsidy given to producers for live animals leaving the island made JBS uncompetitive in cattle purchasing.³⁵
    • Federal subsidy doesn’t cover exports – offal and hides is exports³⁵
• Govt negotiated with JBS to reopen plant⁵
  • Government agreed to underwrite company losses for couple of months³⁵
• Govt will reimburse the company for losses it may incur over the review period (8 weeks)as a direct result of reopening the facility, JBS Swift undertake a review of their operations and cost structures during that time⁵
  • all employees reinstated on full pay²³
• December.$12M – 15 year loan from Gov to JBS, to facilitate significant capital investment program by JBS⁶
• Loan to support  capital investment program worth $14M, allow company to upgrade facilities and improve operational efficiency⁶

 “This money will secure the establishment of a world-class processing facility in King Island and ensure its ongoing viability” Tasmanian Premier John Bartlett⁶

• Loan was repaid in full²²
  • Government have first option to buy because of loan²²
  • loan repaid in full days before decision was made to permanently shut the business down

• Producers set up fighting fund to protect industry brand  – padi $1 a head levy cattle processed at island’s abattoir to ensure only beef produced and processed locally was branded ‘King Island Beef’¹⁵

2012  

• July. Livestock ship Mathew Flinders runs aground with 300 cattle on board.³⁶
  • allegations meat workers tampered with propellor³⁶
• September. “Despite investing millions of dollars into upgrading, the Tasmanian abattoir has never been profitable since his company purchased it’ John Berry CEO JBS.²
• JBS has cited high freight and operating costs and variable livestock supply as reasons for the closure and is in talks with the 70 employees of the abattoir about redeployment²
  • Cited number of reasons of closure including power and energy costs²⁰
  • Costs in terms of utilities and domestic and export freight costs as key reasons²¹
  • Increase in Australian dollar²¹
  • leakage of cattle to processing plants in northern Tasmania²⁸
    • local price often less than other works – producers shipped stock live to mainland Tasmania²⁸
    • King Island abattoir only had capacity to process two thirds of animals produced each year³⁵
    • JBS can process 900 King Island cattle in Melbourne in less than one day at fraction of cost of processing in King Island³⁵
    • Smithton abattoir (Tas) alway sourced 12,000 – 13,000 head of cattle from King Island and had done each year 2008-2013³¹
• Closure was total surprise to producers who had supplied and working with management to improve efficencies¹⁴
  • Livestock immediately devalued by $100 per head.²⁸
• JBS has welcomed producers processing animals at their Longford abattoir (Tas)¹⁴
• Additional costs to transport to Longford is expected to be $70/hd¹⁴
• TFGA (Tasmanian producer organisation) urgently calling on government to address red and green tape which is making business in Tasmania and Bass Strait so costly, including crippling costs of freight¹⁴
• October.JBS refuse to sell or lease the vacant facility³.
• Tasmanian government pledges $80,000 to determine whether a new abattoir on the island would be feasible³
• Costs producers $10 head to transport to abattoir on the Island, will cost $110 to transport to Longford, on mainland Tasmania, South of Launceston³
• JBS offer a community development scheme – $60,000 – $80,000 a year.²⁴
  • JBS want to retain 50% of Islands annual beef turnoff to continue production of King Island beef brand²⁴
  • Scheme administered by a local committee and JBS staff – $3 per head sold to Devonport or Longford plants on mainland Tasmania²⁴
  • Scheme will be paid on a monthly basis.²⁴
• JBS had injected $100M into King Island economy during 4 year ownership of abattoir²⁴
• JBS met with community for protecting and continued use of King Island beef brand from other abattoirs²⁴
  • farm assurance scheme – involves segregation of livestock in transit²⁴

2013 

• February. Formally Closed. Not opening after regular 6 week break. Closed without warning.⁸
• Citing – high cost of doing business on a remote island, rising power prices, uncertainty of cattle numbers and transport logistics. More expensive to export box of beef to mainland than to overseas⁸
  • 80 jobs lost
  • Worth about $3.5M in wages to local economy²⁸
  • Employed four out of 5 islanders²⁹
• Half of labour, employed seasonal Korean students and NZ workers as only operated a few days a week and locals shunned irregular part-time work⁸
• May. Effect on community²⁹
  • Businesses suffered downturn of 5% up to 50% in sales²⁹
  • Multi-species abattoir committee²⁹
    • look at processing bobby calves, sheep.²⁹
    • Local consumption use of product²⁹
    • Wallabies are major problem on King Island – look into processing them²⁹
    • seeking a government grant of $400,000 to put towards small multi species abattoir on island²⁹
• June. Feasibility study released and found that a new abattoir could be built on King Island for $30M⁸.
  • Tasmanian Government commissioned report in Sept. 2012.⁸
  • $48,000 study conducted by Felix Domus consulting.⁹
  • Report says abattoir capable of processing 40,000 head, cattle.⁸
  • Most of Island producers would need to fully commit to supplying the abattoir to succeed.⁸
  • 75% of King Island producers would need to commit, with a reliable supply of 39,000 head a year¹⁰
  • 31,400 cattle processed would cover costs and make 6% profit of $840,000 per year²⁵
  • 39,000 cattle would enable profit $1.9M²⁵
  • prior to closure 800 young cattle were being processed a week, remaining 12,000 shipped to Longford abattoir (Tas), Devonport abattoir, Smithton abattoir (Tas)²⁵
    • Average King Island abattoir throughput was 28,000 head annually²⁸
  • King Island beef needs to be better marketed – especially to high end retailers and restaurants¹⁰
• Feasibility study of King Island abattoir proposal attached
  • KIAFSG final report 17 Jun
• Another processor located on Tasmania mainland at Smithton abattoir (Tas), operated by Greenhams, Producers are paying $112 per head to send cattle from King Island to mainland⁹
• “The associated brand new multi-million dollar producer and taxpayer funded effluent plant remains unavailable for use” Tasmanian Greens MP. Paul O’Halloran¹¹
• JBS, who own Longford abattoir (Tas) on the mainland threaten to close it down if another abattoir is built on KI. Saying that not receiving cattle from KI would hurt its business at Longford¹²
  • JBS – John Berry denied making this claim, saying Tasmanian Greens MP Paul O’Halloran had raised it as a possibility in State parliament¹¹
• July. ACCC had considered investigating why JBS refused to sell King Island – ACCC won’t carry out investigation as “The act does not apply to a company that merely holds an asset and takes no action in relation to that asset” ACCC statement²⁶
• September. Subsidy is offered by government for frieght of live cattle to Tasmania.¹⁶
  • King Island package – $1.246M for 12 months, one-off short term response to significant shock experienced due to abattoir closure¹⁷

  “Package is intended to assist producers to transition to a new model that involves off-island transport to mainland Tasmanian processors for slaughter” Minister Bryan Green – Tasmanian Primary Industries minister.¹⁷

  • Sole freight service for King Island – Searoad Shipping and Logistics – do a triangular service from Melbourne, Devonport and then Port of Grassy (King Island)²⁵
  • Current vessel Mersey capacity of 4000t could be put out of commission for newer larger vessels.²⁵
  • Larger vessels can’t dock at Port Grassy²⁵
  • King island import all fuel and would require export beef.²⁵

  Source – ABC Rural ‘ King Island freight Subsidy’ 17.09.2013Barge that transports cattle from King Island to mainland Tasmania

Source ABC Rural ‘King Island freight subsidy’ 17.09.2013

Open deck of barge used to transport King Island cattle to mainland

• Problems with shipping on Bass strait due to severe wind conditions²⁹
  • If the swell is large the ship can damage the wharf.²⁹
  • Situations when cattle are waiting to be loaded but had to be taken back to properties due to dangerous swell.²⁹
• Freight subsidy covers only one third cost of freight¹⁶
  • Equivalent to $30 per head transported¹⁷
  • King Island local producers are struggling after abattoir shut down.¹⁶
  • Flinders Island has no freight subsidy – boat ride from Flinders Island to mainland Tasmania – 8 hours, costs $65 after Tasmanian Freight Equalisation scheme¹⁷
• Freight subsidy could be sliding scale – $26 into Stanley, $30 into Devonport²⁷
  • would act as disincentive to increase freight efficency²⁷
• Actual costing of freight³⁰
  • King Island to Tasmania – $154.30/head³⁰
  • Tasmania to Victoria – $111.55³⁰
    • Authors note – these costings were done May 2008.
  • Difference $42.75 – Victorian abattoirs on occasion have processed King Island cattle.³⁰
• $300,000 public wharf upgrade was funded by Tas Ports, LD shipping and Smithton abattoir (Tas) operated by Greenhams.²⁷
• New operation has saved 7 hours off transport time for King Island cattle to Smithton abattoir (Tas) abattoirs. (Compared to delivery to Devonport)²⁷
• Port Stanley upgrades completed, closest port to Smithton travel by ship takes 7 hours.³¹
  • King Island to Bernie port delivery takes 12 hours.³¹
  • Stanley port upgraded due to investment by Smithton³¹
    • Smithton will source 12,000 -13,000 King Island cattle each year³¹
    • Ships travelling 3-4 times a week, carrying 240 head each sail.³¹
• JBS “Company is still pleased with its decision to close (King Island)” John Berry. JBS director¹⁶
  • Islands King Island and Flinders supply 200-450 head cattle a week, higher in spring run.¹⁹
    • King Island supplies 20% of the States beef herd²⁹
    • Some producers sending cattle at 300kg on boat to feedlots in Tasmania to grow animals out to 600kg.²⁸
    • 1,000 – 1,500 animals can’t be shipped – will be shot on island²⁸
    • Bobby/Veal calves can’t be sent as too young,²⁹
  • Longford process 450 cattle a day – 4 day week roster.¹⁹
• November. ACCC charge a Victorian Butcher, Hooker Meats Pty Ltd $50,000 for using King Island logo¹⁵
  • King Island 140 beef farmers fought many years to protect regional brand reputation.¹⁵
  • There are manufacturers of King Island rabbit – King Island has no rabbits³⁵
  • There are manufacturers of King Island wine – King Island has no vineyards.³⁵
  • National food do producer and market King Island cheese.³⁵
• December. Tasmania to receive Farm Finance Package¹⁸
  • Last state to do so and halved from original allocation to reallocate funds to drought stricken QLD producers¹⁸
  • Funding $15M, Loans up to $650,000, interest rate initially at 4.5% and interest only payments for up to 5 years¹⁸
  • Available for debt restructuring and mitigate impact of tough seasonal conditions.¹⁸
  • Producers not happy with allocation – “It’s become difficult to farm over here during the past 20 years” David Amos. Swansea sheep producer.¹⁸

 

Sources

1. ‘King Island mounts facebook defence’ Weekly Times 10.10.12
2. ‘King Island Abattoir to close’ ABC rural. 10.09.12
3. ‘King Island abattoir plan’ Weekly Times 30.10.13
4. ‘Famed beef producer King Island has closed its only abattoir’ Meat Trade News daily 13.09.12
5. ‘Swift’s King Island abattoir reopens’AFN  03.04.09
6. ‘King Island Beef brand to live in with abattoir rescue package’ AFN 23.12.09
7. ‘King hit to abattoir leaves island in shock’ The Australian 23.02.13
8. ‘Study finds new King Island abattoir viable’ ABC News 18.06.13.
9. ‘Support for KI meatworks’ The Mercury. 18.06.13.
10. http://www.kingisland.tas.gov.au/webdata/resources/files/KIAFSG%20final%20report%2017%20Jun.pdf
11. ‘Abattoir closure claims unfounded’ The Land. 27.06.13
12. ‘Abattoir closure warning’ http://www.themercury.com.au  26.06.2013
13. http://www.jbsswift.com.au
14. ‘Abattoir closure devastates King Island farmers’ http://www.tfga.com.au
15. ‘ACCC swoops on King Island beef brand claims’ Beef Central 13.11.2013
16. ‘Abattoir closure continues to bite’ ABC News 14.09.13.
17. ‘Flinders farmers seek gaurantee’ Stock and Land. 21.11.2013
18. ‘Reduced Farm finance share open for Tas” Stock and Land 20.12.13
19. ‘Expansion plans ahead for JBS Longford – One of Australia’s most versatile meat plants’ Beef Central 18.10.13.
20. ‘States $12M fails to save abattoir’ Tasmanian Times 10.09.12
21. Parliment Hansard. Richard Colbeck. 10.09.2012
22. ‘Jobs in balance as abattoir closes’ ABC News. 11.09.12
23. ‘King Island abattoir set to reopen’ Stockjournal 27.05.2009
24. ‘Australia – JBS Australia abattoir on the King Island’ Meat trade News daily. 14.10.2012
25. ‘Tasmania looks into new abattoir for King Island’ http://www.fullyloaded.com.au 18.06.2013
26. ‘ACCC says no to King Island abattoir inquiry’ ABC news. 13.07.2013.
27. ‘King Island freight subsidy fight’ ABC rural. 17.09.2013
28. ‘Cattle Stranded’ ABC Landline 18.11.2012
29. ‘King Island Beef farmers battle their own live export crisis’ The world today 31.05.2013
30. ‘Tasmania Freight subsidy reforms’ Letter Grant Ryan. 01.05.2008
31. ‘Port of Stanley ready to receive cattle ships’ The Advocate. 04.07.2013.
32. ‘Tasman services fulfill final payouts’ The Examiner 23.10.2003
33. ‘Big beef producer cuts deal with Tasman Group’ The Age 06.03.2008
34. ‘SBA foods sell to Tasman Group Services’ Stock and Land 19.03.2002
35. ‘Long Live the King’ ABC Landline 11.05.2009
36. ‘King Island meat company’ AMIEU Tasmania 09.07.2012
37. ‘Power costs short circuited JBS’ Nth QLD register. 11.09.2012
38. http://www.tic.tas.gov.au. 04.07.2005