V&V Walsh, Bunbury, adds extra processing shifts

Bunbury-based V&V Walsh started its six-day working week last Saturday, and also increased its lamb to sheep processing ratio.

Previously, the processor was working a regular five-day week schedule and concentrating on the more profitable mutton trade.

The extra-day change, which is set to be in place for three weeks of every month until Christmas, will increase throughput by up to 7500 lambs per week.

The decision follows discussions with suppliers who wanted to free up pastures with new season lambs.

V&V Walsh chief executive officer Brent Dancer said the change meant their weekly lamb requirement would increase by 30 per cent to 21,000 lambs per week while still maintaining mutton requirements

"I understand there are more old-season lambs onfarm than normal for this time of year," Mr Dancer said.

"We hope the move will free-up pastures for producers to get weight onto their new season lambs."

He said there were two related factors for the build-up of old-season lambs in WA.

Firstly, post-COVID-19 overseas cold stores in major consumer markets were full of high-priced lambs they were struggling to shift.

And secondly, the resultant fall in prices has prompted many farmers to hang onto their lambs in the hope the market would rebound, which hasn't happened.

"We think this is a relatively short-term supply-demand imbalance and it will soon be corrected," Mr Dancer said.

"However, there was a need from our lamb suppliers to shift large numbers of old season lambs now, and so we have responded."

Mr Dancer recently visited China and saw firsthand the impact COVID-19 had on the economy.

Shops and restaurants were forced to permanently close and volumes of meat were seen sitting inside coldstores.

Some of that meat had been sold by major suppliers in WA almost two years ago, and was pushing up to the expiry date.

Mr Dancer hoped the Chinese government would introduce some stimulus to create change, saying it could be challenging for the next six to 12 months.

He said with no government support in more than three years of lockdown, people were forced to dip into their own personal savings.

Emerging from the COVID bubble, they have returned to work and into a savings mentality.

"As a result of this, the Chinese economy has gone into a deflationary situation whereby people aren't spending enough to stimulate the economy," Mr Dancer said.

"Despite this, China has overtaken America in volume of imports out of Australia, but the price they are willing to pay has significantly reduced."

Over the past six to eight weeks, Mr Dancer said prices on key primal cuts had dropped by up to one US dollar per kilogram a week, over three or four weeks.

He said the export price they were willing to pay for Australian lamb had been dropping at a quicker rate than the livestock price in the past two months.

"I think we're getting close to the floor, but that's been a key driver for the drop in lamb prices across the country," Mr Dancer said.

"There's just no export market that is willing to pay the required price for it to go on the carcase at this stage."

So how long could it be until those coldstores return to normal?

Mr Dancer said it was difficult to say as different markets meant different outcomes.

However, he hoped volume or the price relating to volume would significantly increase during the lead up to Chinese New Year in February as importers looked to buy in product during November-December.

"People will have to gear up and have the stock around at that time," Mr Dancer said.

"The key message is that the volume will keep moving and there'll always be a home.

"I just think for Australian lamb, it's at what price importers are willing to pay.

"And that's the key driver at the moment, which is making it challenging for prices."

When the likes of China and the US are struggling, Mr Dancer said secondary lamb markets including the Middle East, Korea, Europe and Japan, know they don't need to push to gain supply.

He said a lot of those markets, including Korea and Japan, were also under significant pressure from the economy and supply of meat products in their freezer.

Taking a look at the carryover of sheep, Mr Dancer said the timing of moving the old-season lambs had been an issue.

Unfortunately, he said for many producers the back end of winter had been drier than anyone was hoping for.

"Some producers were probably looking at holding those lambs and putting them through into breeding stock," he said.

"Others were hoping they would see that standard incline in the lamb prices, which we normally see in winter, as supply starts to tighten before the new season.

"The July to August period is probably our highest price point for that, but unfortunately it hasn't happened this year because of the oversupply.

"I think a percentage of people have been caught by that and obviously there's the issue of last spring, when processors around the country were feeling the pinch of COVID and labour shortages.

"We have a lot more lambs in the back end of the year at a time we normally wouldn't."

Despite the fall in prices, Mr Dancer said WA's sheep market was performing higher than in the Eastern States.

He said it was a "very crowded" export market at the moment, and customers had agreed to take extra lambs to help processors through the current backlog.

Looking ahead, Mr Dancer forecasted a return to standard volume trends within 12 months.

He said while V&V Walsh was already back at pre-COVID staffing levels, they were always on the lookout for labour.

"We're really gearing up for the fact we need to grow our staffing numbers for a number of reasons," Mr Dancer said.

"We have had to work pretty hard in terms of skilled workers coming through the Pacific Australia Labour Mobility (PALM) scheme and have also tried to attract as many locals as we can.

"We lean on internal training programs to upskill staff."

In terms of whether the six-day working week would extend beyond Christmas, Mr Dancer said V&V Walsh was open to work through what's needed from a market point of view.

At this stage, he said no end date had been put on the Saturday shifts, however they needed to be careful about the workforce and staff.

"We need to consider the health and safety of our workers first and foremost," he said.

"We will certainly try to manage workloads around the numbers and try to extend it as far as we can to help with the backlog and farmer concerns.

"We need to be doing our part to assist with the issue been experienced onfarm."