Major WA agribusinesses plan new investments to create scale and efficiency, while smaller operators are cooperating to access new markets with niche products.
Major WA agribusinesses plan new investments to create scale and efficiency, while smaller operators are cooperating to access new markets with niche products.
The 440 members of the Southern Forests Food Council provide an illuminating case study on how smaller agricultural businesses in WA can work together to carve inroads into global markets.
The council members sell under the Genuinely Southern Forests brand.
They are working with food distributor Mercer Mooney to take products international, with 40 tonnes of avocados sold to Malaysia in the past six months.
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Southern Forests Food Council chair Monica Radomiljac said the Malaysian customer had been won over from a previous supplier in central America.
“They’d been previously purchasing their avocados from Mexico, and our price is slightly higher but Mercer convinced them to change,” Ms Radomiljac told Business News.
“They increased their orders until we were unable to meet their orders.”
She said the customer probably would have bought four times that amount (40t) if it had been available, which could be met by future increases in supply.
“As more trees are coming online down here, exports are going to be the answer,” Ms Radomiljac said.
The council sells overseas under the Genuinely WA brand, with Mercer Mooney working on deals into Singapore, Malaysia, Indonesia, Hong Kong and the United Arab Emirates for various fruit and vegetables including plums, melons, citrus and broccoli.
However, the experience of local potato growers highlights that accessing international markets is not always easy, according to Potato Growers Association of WA chief executive Simon Moltoni.
The association has hired AgWA Consulting to develop an export market plan, which it will release in coming weeks.
The industry will need restructuring to be competitive for exporting, Mr Moltoni said.
The period since deregulation of the local market has proved challenging for producers, in good part because of the outbreak of two diseases that limited market access, even within Australia.
Mr Moltoni said opening new markets often took years, with individual businesses unlikely to have the resources to do so.
The association is prioritising work on growing the fresh potato market in Taiwan and South Korea and the seed potato market into Egypt, he said.
“Exporting (potatoes) has never been regulated, it’s fluctuated over the years but there’s been no steady growth,” Mr Moltoni said.
“We think that the fundamentals of the supply chain need to be addressed before we have significant growth (but) there are opportunities.
“We have some advantages like counter-seasonality.”
Projects
The two largest projects on the list of major agriculture projects planned in WA have held those positions for at least two years.
Both have had different outcomes, however.
CBH Group has been rolling out a five-year network strategy, worth about $750 million, which is still ongoing.
Aquaculture business Seafarms Group had proposed a $1 billion onshore prawn farming operation to be based in the Kimberley and Northern Territory, and that project is still not under way.
In the case of CBH, the investment is to improve the efficiency of the supply chain, focusing on 100 core grain receival sites.
CBH’s annual report for the year to October 2018 said the company had invested $130 million on new storage, throughput enhancements and sustaining capital projects over the preceding 12-month period.
“In 2018, more than 650,000t of new permanent storage was constructed and 1.1 million tonnes of emergency storage built for the 2018-19 harvest,” the report said.
“During the year, permanent storage was built at Kellerberrin, York, Narrakine, Broomehill, Grass Patch, Koorda and Perenjori.
“In addition, 24 sites will benefit from new or upgraded pits and conveyors that enable sites to receive grain faster.
“The strategy will improve the service and efficiency of our core 100 receival sites, keep our fees competitive and deliver tonnes to port when needed most to meet the market.”
Seafarms has proceeded more slowly with its project, although it has so far invested more than $100 million on development, the company said.
The company secured a 90-year sublease at Legune Station in (the Northern Territory) in December, and in recent weeks was granted an extension of its major project status with the federal government.
In early April, ASX-listed Seafarms raised $20 million through a share placement, with a further $4 million planned.
That will fund early works programs.
There are at least four other proposed projects in the aquaculture space.
Tasmania-based Huon Aquaculture was given approval in October by Western Australian government to lease 2,200 hectares off the coast of Geraldton for a yellowtail kingfish farm.
At that time, it said operations would be at least two years away, although a spokesperson told Business News a time frame had not been confirmed.
“The project is in the initial stages of planning and research and specific details regarding timeframe and budget have not yet been determined,” the spokesperson said.
“We plan to ... progressively (grow) annual production to 10,000t over a 10-year period, subject to market demand.
“However, Huon’s ability to meet the proposed development targets is dependent on many factors, including but not limited to collection of environmental data, creation of a suitable harvest site, shore base facilities in Geraldton, a camp at the Abrolhos Islands and a nursery that can consistently supply the necessary quantities of (yellowtail) fingerlings.”
Meanwhile, Ocean Grown Abalone appointed Busselton-based Big Ben Builders to a $2.7 million contract for a processing facility in Augusta.
According to an investor presentation released in early April, the facility is on track for completion in mid-2019.
In January, the Department of Primary Industries and Regional Development ticked off a project to increase the number of artificial reefs operated by the company by 50 per cent, to 15,000.
That would increase production to 300t annually.
A third project highlighted in Ocean Grown’s presentation was a land-based abalone growing facility near Esperance, which could produce up to 500t annually.
Feasibility studies are yet to get under way.
Andrew Forrest’s beef producer, Harvest Road, announced a major expansion in December, with plans for a $50 million development with capacity of 60,000 cattle.
Harvest Road is owned by Minderoo Group, and controls the Harvey Beef brand.
The 6,900-hectare facility will be near Moora and will help lift Harvey’s output by 40 per cent annually.
It will also enable cattle shipments to take place year round.
The investment will include acquiring land and building feeding and finishing stations to produce a rolling output of cattle fed over 100 days.
The livestock will be processed at the company’s facility near Harvey.
Inghams Chicken is seeking development approval for a $20 million poultry hatchery in Muckenburra, which is near Gingin, while Craig Mostyn group is planning a $13 million pigger expansion nearby.
Revenue
The state’s five biggest agribusinesses have revenue of about $6.1 billion, led by grain handler CBH Group, which had sales $3.8 billion in the year to October 2018.
To put that in context, the DPIRD estimated total agribusiness exports run at about $8.5 billion annually.
Most agribusinesses are private, so data is not regularly made publically available.
However, some data is estimated from the Australian Competition and Consumer Commission’s annual bulk grain ports monitoring report.
There are three grain exporters among the top five agribusinesses, according to BNiQ, with Glencore and Plum Grove joining CBH.
Swiss multinational Glencore is second, with revenue of about $910 million for the year to June 2018, while Fremantle-based Plum Grove is fourth with sales of about $493 million.
Plum’s share of the WA market was about 7 per cent, the ACCC found, while Glencore was 13 per cent.
The report also found CBH’s market share in WA increased from 45 per cent in 2016-17 to 54 per cent in 2017-18.
There are a variety of sizeable private businesses outside the grain space.
Seafood producer KB Food, now owned by Chinese business Legend Holdings, ranks third with revenue for the year to December 2017 of $567 million.
Legend’s most recent update to the Hong Kong Stock Exchange highlights that sharpening the supply chain is a focus for KB Food going forward.
“(KB Food) expanded its categories of imported seafood to include lobsters from North and South America,” the report said.
“While increasing its revenue from Australian market, KB Food also actively developed Chinese and international markets.
“KB Food has become the best seafood supplier of the year of Woolworths … at the same time, KB Food signed a five-year contract with Compass Group, the world’s largest restaurant service provider with an operation experience across 50 countries.”
Meat processor WAMMCO was fifth, with $380 million of sales.
