Yesterday the Canadian company announced the closure of its Penola plant in South Australia, making 59 employees redundant at the end of the year, and the expansion of operations at Ballarat.

Ballarat potato growers group chairman Norm Suckling said there were two sides to the coin regarding the announcement. 

“The downside is that this is another step away from losing the industry completely. It’s not good to see any agricultural business

 close,” he said.

“But I’m pleased for the opportunity for Ballarat to expand towards what we used to be. The question is whether we can make money out of it.

“It’s good for the Ballarat region to expand its tonnage but with another factory closing it’s a bigger problem than McCain.” 

Mr Suckling said he understood McCain’s efforts to become more efficient in its processing. 

He said he believed Ballarat’s plant was safe for the short term but it was difficult to say if the same thing that had happened to Penola could

 happen to Ballarat in the long term. 

“I can’t see anything happening to the Ballarat plant in the short term and McCain are trying to make sure that it won’t happen.”

But in a visit to Ballarat yesterday, the Australasian boss of the $6 billion global food giant has blamed the rising costs of labour, fertiliser, electricity, petrol, and the carbon tax for putting local potato growers in a position where they are 55 per cent less competitive than US counterparts.

Louis Wolthers, McCain Foods regional president for Australia, New Zealand and South Africa, will shut the McCain Foods potato processing plant at Penola on December 20, making 59 employees redundant.

The closure of the processing plant has been triggered in part by a sharp jump in imports of frozen french fries as fast food chains, cafes and restaurants and supermarket chains seek cheaper processed potatoes.

He said total imports of frozen french fries into Australia had increased to more than 130,000 tonnes by the end of 2012, from just 10,000 tonnes in 2002, and is continuing to rise. The shift by large supermarket chains to a higher percentage of private label brands in their frozen foods section was also an issue facing food manufacturers.

The decision to close the Penola plant has also been influenced by rising labour costs and increased electricity costs at the factory, which on top of the uncompetitive raw material costs of potatoes, meant it was no longer economically viable. But even before the potatoes arrive at the factory, costs are too high. 

Mr Wolthers said he does not blame the potato farmers who are working hard to improve their productivity.

But internal studies in 2010 by McCain Foods, which operates 50 production plants on six continents, showed the most efficient potato growers are in Idaho in the US, at about $168 per tonne.This compared to Australian potato growers at $261 per tonne. 

A spokesperson for McCain said production at Ballarat will be increased as all the Penola potatoes will be processed at the plant.