20/04/2022 - 15:38

Kimberley meat co-op on hold

20/04/2022 - 15:38

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Plans for a $35 million cooperative to take ownership of the Kimberley’s sole abattoir have not progressed, with Yeeda Pastoral Company instead retaining full ownership.

Kimberley meat co-op on hold
Plans for a $35 million co-operative to take ownership of the Kimberley’s sole abattoir have not progressed. Picture: Yeeda Pastoral Co.

Plans for a $35 million cooperative to take ownership of the Kimberley’s sole abattoir have not progressed, with Yeeda Pastoral Company instead retaining full ownership.

Yeeda and its advisers have spent most of the past year in discussions with other pastoralists about forming a cooperative to purchase its wholly-owned subsidiary, Kimberley Meat Company.

The co-op had planned to take out a $35 million loan under a state government scheme but did not obtain approval in time.

Therefore, Yeeda has decided to reopen the abattoir under its sole ownership.

Yeeda chairman Mervyn Key said he had been anticipating final approvals by the end of December last year but encountered repeated delays.

“It was quite clear that notwithstanding a lot of work and effort by those involved the government was unable to get the loan in place and in time,” he said.

“We decided to postpone the idea of forming the co-op this year and go ahead owning the abattoir as we have for the past six years.”

Mr Key said the concept of a cooperative emerged early last year, after Yeeda decided it would not open the abattoir for the 2021 season.

That was because high cattle prices made it more attractive to sell live cattle to east coast farmers looking to rebuild their herds and operating the abattoir would have resulted in running at a loss.

“We thought the cooperative was a feasible idea,” Mr Key said.

“The plan was that we would sell our abattoir and its infrastructure to a cooperative.

“The members would supply cattle and run the abattoir as a separate business.”

Mr Key said Yeeda’s advisers, investment bank Poynton Stavrianou, initially looked at private funding.

That changed after the government suggested a loan under its scheme for co-ops.

The proposed loan would have a low interest rate and the capital repayments would be tax deductible.

The co-op members had to provide bank guarantees so the government would not bear any risk.

“We decided that was a good funding mechanism for the co-op,” Mr Key said.

“The attraction is the tax deductibility of the capital repayments and the low interest rates.”

He said he was disappointed when the funding approval was delayed.

“To the best of our knowledge, everything they requested had been provided," Mr Key said.

“The co-op had no time to look at alternative funding with the season upon us, the most important thing was to get started.”

Agriculture Minister Alannah MacTiernan said she signed off on the loan in mid-March but before this was communicated to the co-op members, the government was told the plan had been postponed.

Her approval came with one condition, which she did not believe would be onerous.

“I wanted to make sure it was clearly communicated that the co-op members needed to do their own due diligence,” Ms MacTiernan said.

“I didn’t want people investing just because there was a government loan.”

The minister noted that the loan application and business case for the co-op were only submitted in December.

She conceded the department “probably could have been a little quicker” but added it was “a bit naïve” for the proponents to expect a decision in the space of one month.

Ms MacTiernan said she was not too concerned about the co-op not proceeding.

“Our primary objective was to get the abattoir up and running," she said.

“We offered the loan as a mechanism to take that forward.”

Ms MacTiernan added that the government still supported the concept.

“I would love it to go forward as a co-op," she said.

“The offer is still there.”

Mr Key said discussions were continuing but there was no guarantee the cooperative concept would proceed

“We have a totally open mind,” he said.

“Its not just our decision, it’s the other producers’ decision as well.

“Its something that will go ahead if it makes commercial sense.”

He added that the ownership structure could not change halfway through a season, so the first available time to put in place a co-op structure would be the beginning of next year.

Mr Key noted that the number of pastoralists planning to participate in the cooperative was a lot fewer than 14, as previously speculated in other news outlets.

“It was in excess of half a dozen, which is more than is legally required to form a co-op, and those players will still be around when we relook at it moving forward,” Mr Key said.

Meanwhile, Kimberley Meat Company chief executive David Larkin said the abattoir, located between Broome and Derby in the west Kimberley, would reopen next week.

The plan was to process at least 40,000 cattle this season.

The abattoir would commence operations with 55 staff, with plans to build on that, with about 100 staff needed to operate at full capacity.

Mr Larkin said it had been easier to recruit staff since the state borders had opened.

“We’ve been able to attract people to come and live and work in the Kimberley,” he said.

Mr Larkin said cattle prices were still at almost record highs but world protein markets had caught up.

“Our market is global and the demand for beef around the world is very strong,” he said.

About 20 per cent of the abattoir’s cattle will come from Yeeda, which owns a 500,000-hectare station adjacent to the abattoir.

The balance would come from other pastoralists in the Kimberley and the Northern Territory.

“We’ve had some overwhelming support from local pastoralists wanting to commit cattle to the operation, so the cattle supply in front of us is very strong,” Mr Larkin said

The alternative abattoirs in WA are run by Western Meat Packers and Harvey Industries Group in the South West.

“They are a good 2,400 kilometres from the Kimberley and with the focus on animal welfare, that it a very long way to truck cattle,” Mr Larkin said.

“Killing cattle at the source is a much better option.”

Mr Key said other options for Kimberley pastoralists were to sell cattle over east or ship cattle to Vietnam, Malaysia and Indonesia.

Mr Larkin said he was evaluating options to extend the season to 11 months, with the abattoir scheduled to open in the first week of February next year. 

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