03/04/2018 - 15:52

Agribusiness seeks global growth solutions

03/04/2018 - 15:52

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SPECIAL REPORT: The increased use of technology in one family-owned WA agribusiness is an example of many changes happening in the industry more broadly.

Agribusiness seeks global growth solutions
Frank Galati (left) is using technology to make structural changes in dad Tony's business. Photos: Attila Csaszar

Technology has always played a decisive role in the development of Western Australia’s agriculture sector, whether in the form of machinery improvements, soil modification, crop enhancement or harvesting.

And it’s no different in terms of how agriculture producers have adapted the use of internet technology to their systems and supply chains.

One agribusiness embracing technological change is O’Connor-based grower and retailer Galati Group, ranked ninth on the BNiQ agribusiness list.

Entrepreneur Tony Galati runs the business with son Frank, who is chief executive, and second son, Sebastian, also on the leadership team.

(Click to see a full PDF version of this three-article special report)

Frank Galati said the new generation had brought a fresh perspective on operations.

“I’ve come from a family business where you just get things done,” he told Business News.

“Which we still do now.

“(But) as you get bigger, the minor things add up quite significantly, so you want to be able to see them more … to make better management decisions.”

That means the introduction of more solid control systems to give better visibility on operations.

“We scan every single product that leaves our farm and know exactly when it leaves, where it’s going, how much of its going where,” Frank Galati said.

“We know exactly what’s in the ground at any one moment, whereas before we’d have to drive around and see exactly what we had left.”

Tony Galati said the previous system had worked, but agreed the big benefit of increased technology was that it cut the amount of time required.

“I’m more old fashioned because I’m out there in the field seeing what happens all the time; these guys have so many things to look at, they need info at their fingertips,” he said.

Australian agribusinesses had to calculate everything carefully because they faced such high costs, he said.

The business has spent a bit of capital on the changes in recent years, according to Frank Galati, although not a significant amount.

“These days, in agribusiness you have to be spot on, getting your yields right, with market fluctuations and prices going up and down,” he said.

High labour costs compounded that problem, as did a frequent scarcity of workers.

“We’re focusing on automation (to reduce labour costs) as much as we can,” Frank Galati said.

There is increasing competition in export markets, particularly from China, which he said had deflated prices in the business’s key markets such as Indonesia, Malaysia and the Middle East.

Despite that pressure, Western Australian farms still had an advantage with product quality.

“Australian grown is highly sought after, we still get a premium for our product,” Frank Galati said.

Technology is key for quality assurance, according to RaboBank senior grains and oilseeds analyst Cheryl Kalisch Gordon, who spoke in Perth at the Partners in Grain conference in March.

Blockchain technology, for example, could help guarantee the provenance of food sources, Dr Kalisch Gordon said.

Improved data collection through increased numbers of sensors and the internet of things would improve decision making, efficiency and cut costs, she said.

Lower costs may not be enough, however.

Australian grain, for example, is $80 per tonne more expensive than that from the Black Sea, Dr Kalisch Gordon said.

“We need to operate in the space that delivers the additional value because we can’t compete on a cost-alone basis,” she said.

“There will be things that will be valued about food in the future that (farmers) may not necessarily see coming, or agree with, but that doesn’t mean there’s not a market.”

Fresh Produce Alliance co-owner Jennifer Franceschi was also acutely aware of the need to be more competitive.

Her business processes avocados in Manjimup, with key export markets including Singapore and Malaysia.

Ms Franceschi said automation and increased use of technology was a key part of her business strategy.

The alliance has invested nearly $6 million on high-pressure processing equipment, which enables Fresh Produce to extend product shelf life and use a wider range of farmgate produce.

Meating demand

Horticulture and grain are not the only two agribusiness segments increasing their uptake of technology.

Cottesloe-based livestock producer Harmony Agriculture and Food Company uses its electronic tags to collect data on livestock individually, and runs it through its data analysis program.

The business plans to set up a system to weigh cattle daily when feeding, using walkover weights, giving a much larger than usual set of data points to track performance.

Chief executive of lamb processor the Western Australian Meat Marketing Cooperative, Coll Macrury, told Business News that finding workers was a perennial problem at its two abattoirs.

There was only so much that could be done through automation, however, as some cuts were still too intricate for robots, he said.

“We’re having to bring in overseas labour regularly, but there’s (increasing) red tape with it,” Mr Macrury said.

“(Policy makers must) make sure that they don’t make foreign labour too difficult to get and keep.”

About 10 per cent of 400 workers at the cooperative’s Katanning plant were foreign, whereas up to 40 per cent could be at its Goulburn operation in NSW, he said.

Despite this, exports are still the cooperative’s main market, with most of the million head of sheep processed by Wammco in WA each year heading to North America, China and the Middle East.

Recent free trade agreements were a further positive.

“Over time the Chinese one will be important, definitely, for the volume we put in there, (it will) be an advantage,” Mr Macrury said.

A couple of capital investment projects under way would also present opportunities, such as a reorganisation of the processing rooms to enable greater value adding, he said.

Facilitation

Horticultural player Odeum Farms recently entered export markets as a means to diversify the business.

Export manager Nick Paterniti told Business News that Odeum started selling overseas about 18 months ago, with major lines including melons to Malaysia, Singapore and Dubai, brussel sprouts to South Korea and strawberries into South-East Asia.

He said the business had really benefited from facilitation programs run by industry bodies such as AusVeg and Vegetables WA.

“We’ve really leveraged the networking opportunities (they’ve) created,” Mr Paterniti told Business News.

Benefits were higher prices and buyer diversification.

Nick Paterniti says Odeum Farms has recently entered new markets. Photo Attila Csaszar.

Other diversification moves included investing into a food services business that supplies mining camps and hospitality, Fresh Corps Farms.

Horticulture has faced challenges, however, particularly in biosecurity, with a recent listeria outbreak in east coast rockmelons.

Despite the distance from WA, it meant public perception issues overseas and had raised the posibility of bans, Mr Paterniti said.

Vegetables WA chief executive John Shannon said there had also been a biosecurity incident last year with the discovery of the tomato potato psyllid in WA.

That reduced sales to the east coast, although the introduction of new washing protocols had alleviated the pressure somewhat.

Mr Shannon said the association had participated in a successful national export facilitation program linking growers with new markets.

A further move to improve competitiveness was participating in a national benchmarking process, where growers would collect data to compare wastage to other states.

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