01/06/2017 - 15:40

$2bn investment on fertile ground

01/06/2017 - 15:40

Bookmark

Save articles for future reference.

An upgrade to a meat processing plant at Katanning, a chicken feed mill in Muchea, a new piggery at Moora and a live lobster holding facility in Welshpool are the latest in a string of investments that will boost the agribusiness sector in Western Australia.

$2bn investment on fertile ground
Grain handling cooperative CBH Group will spend $750 million to make its network more efficient.

An upgrade to a meat processing plant at Katanning, a chicken feed mill in Muchea, a new piggery at Moora and a live lobster holding facility in Welshpool are the latest in a string of investments that will boost the agribusiness sector in Western Australia.

It brings to more than $1 billion the total level of investment in agribusiness projects either under way or planned, while a second group of projects worth at least $1 billion more is possible (see table).

Lamb meat cooperative WAMMCO plans to spend about $4 million at the Katanning plant, including a new water recycling plant, room upgrades, and a new vacuum packing machine.

Today, the company received a $3 million concessional loan from the state government to support the plan, which the cooperative said would increase sheep processing capacity by around 100,000 head per year, mostly for export.

Last month, Business News revealed that poultry producer Ingham’s Chicken would build a $70 million feedlot in Muchea on industrial land owned by Sirona Capital.

The company said the plant, to be opened in 2020, would enable it to grow production volumes in WA, although it was unclear how much. 

Sydney-based Ingham’s also foreshadowed a plan to build a new hatchery in WA, with a location had yet to be finalised.

Two planned investments into the pork industry received development assessment panel approval in the past 12 months, with a combined value of $34 million.

The most recent was a proposal by Westpork for a $21 million piggery near Moora, which would hold around 68,000 pigs.

A further expansion could increase that capacity to more than 100,000 pigs.

In May 2016, approval was granted for a $13 million project to expand the Craig Mostyn Group piggery in Red Gully (Shire of Gingin) from around 22,000 pigs to more than 50,000.

Agricultural consultancy Planfarm director, Graeme McConnell, said there was some capital flowing into agribusiness from overseas, but that the investment surge did not necessarily have a direct correlation with the downturn in mining.

“I think the dollars that have been invested into agribusiness have been dollars that maybe wouldn’t have ended up in the mining industry anyway, that’s my reading off it, Mr McConnell told Business News.

“The returns in agriculture are pretty solid and certainly in the current low interest rate environment, for people who have knowledge of the industry, it’s actually quite a good place to invest.

“While a lot of clients are reinvesting into buying more land, there is now increasing interest from outside the traditional investors in farmland”.

By far the two biggest investors on the list are grain handling cooperative CBH Group and ASX-listed Seafarms Group.

Seafarms is planning to build a $1 billion-plus prawn farm near the state’s border with the Northern Territory across a number of stages, and most recently achieved Commonwealth environmental approval for the first stage.

CBH Group general manager operations David Capper said the cooperative would be investing $750 million across a five-year period to improve capacity and speed through its network.

That included a move to halve the number of grain receival sites from more than 200, and ensuring tonnages were exported in the right part of the year to maximise price.

That was because Northern Hemisphere producers generally exported in the second half of the year, making January through May the ideal time for WA growers.

Mr Capper said a move to raise network throughput to 18 million tonnes per annum had already been successful.

The rationale was to try to dramatically reduce costs across the network in order to help the state’s growers stay competitive against new suppliers, such as in the Black Sea, he said.

Kerman Contracting business development director James Rowdon said there had been a definite increase in activity in agribusiness, not just in grain.

The Ardross-based contractor recently won a $6 million design and construct contract for CBH’s new oats mill in Forrestfield.

Mr Rowdon said Kerman had decided to increase its focus on agribusiness, and there was definitely a lot more discussion around town about the industry.

He said the increased investment interest was partly driven by an uptick in demand from Asia.

“When you have great crops year on year which we’ve had for the last few years now, it helps a lot, too” Mr Rowdon told Business News.

WAFarmers president Tony York said the opportunities created by China and other markets in South East Asia were supporting confidence.

“This is in addition to Australia’s more traditional markets," he said.

“There are strong signs that there is a demand for premium quality products that we produce, and that the necessary premiums are there to justify this level of increased investment.

“Perhaps for the first time in many years, Australia’s inherent high cost of processing can be accommodated by the premium-paying markets.”

Mr York said capital flowing into the sector was from sources including global sovereign wealth funds and superannuation funds.

He said he believed investment was higher than in recent years, driven by increased awareness of the opportunities in the sector.

“Australia is one of only approximately 25 countries that are consistent exporters of food, and the current global uncertainty led by issues including climate change, political instability and population growth, have combined to accentuate the unique situation we are in as a global food exporter,” Mr York said.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options