The meat workers union has assured the estimated 1000 employees at the Beresfield chicken processing plant that owner Baiada will not close the factory "any time soon".
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The Baiada letter said "rationalisation options under consideration include total closure, reduced production levels, conversion to a specialised free range operation or free range chicken and turkey production".
It said the company's "distinct preference" was to avoid entering into new growing contracts.
"However, if we elect to offer and enter into any new growing agreement in 2022 upon expiry of an existing contract, we wish for it to be expressly clear that we do so on the understanding there is a strong possibility the contract may not run the full term and that we may exercise the 6 month termination right in clause 25.4 at any time after entry into the new contract," it said.
Baiada won approval last year for a huge new processing plant at Tamworth which could replace some or all of the Beresfield factory's output, but the company says it has not made a final investment decision about proceeding with the Tamworth project.
Australasian Meat Industry Employees Union Newcastle Northern branch secretary Justin Smith said the letter "doesn't sound real good", but the union had been aware for "quite some time" that the Tamworth plant would have an impact on the Beresfield site.
"We're about to put some stuff out to our members explaining that there's no indications there's changes to the site yet, but as we all know there will be changes some time in the future," Mr Smith said.
"I'm very confident that Baiada's not going to shut tomorrow. I'm confident the site is going to be around for a lot longer yet, but at what capacity no one knows.
"We know it's going to happen one day, but we won't know until they actually make the decision."
Mr Smith said the Tamworth construction site was limited to "some surveying pegs in the ground" and it would take about two years to build the new factory.
Some industry sources said they interpreted the Baiada letter as an attempt to "intimidate" growers during contract negotiations, but one Hunter farmer said he took it as a serious warning the plant could shut.
Baiada said this week that the letter "should not be misinterpreted as an indication we are moving toward closing the Beresfield processing plant".
"There has been no decision to close the Beresfield plant, and there may not be any such decision," a spokesperson said.
Shutting the plant could wipe out the estimated 100 chicken farms in the Hunter and Central Coast, which have no access to alternative processing factories. It would also affect the jobs of hundreds of other workers in the supply chain, including truck drivers and feed growers.
Upper Hunter Nationals MP Dave Layzell said Baiada had given the government assurances on Thursday that it was not closing the plant.
The company shut its Ipswich processing plant in early 2018 after giving south-east Queensland growers and hundreds of workers five months' notice.
All that letter has done is stir things up without giving us any real idea of what's going on.
- Justin Smith, meat workers union branch secretary
Baiada managing director Simon Camilleri said when announcing the Ipswich closure in August 2017 that "market conditions ... require us to consolidate our national processing operations, meaning we can no longer viably operate the Ipswich facility in the medium to long term".
The poultry meat industry has become dominated by two main players, Baiada and Ingham's, after a series of company mergers.
The industry is shifting away from family-farm growers to large corporate suppliers such as ProTen, which owns 561 chicken sheds across Australia, produces about 130 million birds a year and gained development approval in 2020 for 54 new sheds near Tamworth.
ProTen does not own sheds in the Hunter.
Mr Smith said the Baiada letter demonstrated a "lack of understanding" about what impact it would have on workers and farmers.
"It was poorly handled by Baiada," he said.
"I don't understand it. It comes as a shock, and all it's done is upset a lot of people. We've fielded a lot of calls from members.
"All that letter has done is stir things up without giving us any real idea of what's going on."
The Australian Competition and Consumer Commission approved the merger of Baiada and Steggles brand owner Bartter in 2009.
ACCC deputy chair Mick Keogh said on Thursday that the Hunter situation reflected structural changes in the industry rather than the effects of company mergers.
"There hasn't been any significant mergers in the past decade," he said.
"Processors are consolidating their operations into newer, larger processing centres, and on top of that there's been the emergence of corporate growers such as ProTen and a number of others.
"I suspect the processors are shifting their supply requirements to those rather than the smaller growers that have traditionally been the suppliers."
Mr Keogh said the ACCC was focused on ensuring contracts between processors and growers were balanced and fair and did not shift all risk to farmers.
"We would expect that in any decision to shut down or relocate processing there would be full compliance with contracts and adequate notice given so that appropriate changes can be made," he said.
"It's not our role to interfere in decisions in relation to a processing plant shutting down."
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