DESPITE a rough couple of years since investing in the Australian beef processing industry in 2014, China’s Hengyang Group is in the Australian beef business for the ‘long-haul’, a Melbourne Show industry audience will be told today.

The Tabro Meats business, comprising processing plants at Lance Creek in southern Victoria and Moe in the Gippsland region, was bought in 2014 by Hengyang Group (formerly Foresun Group) from industry veteran, the late Ted Brorson.

Tabro chief executive, Jack Jiang

Tabro Meats chief executive officer Jack Jiang will address a Royal Melbourne Show agribusiness lunch today on where the business is up to, and future plans.

Cattle prices have risen dramatically since Hengyang took over the operations, and both plants were shut for lengthy periods over the past year due to volatile cattle prices and lack of processing margin.

Last year’s slaughter season clearly produced some tough lessons for the new owners about the volatility and often narrow or non-existent margins in Australian beef processing, as cattle pries sky-rocketed. At the time of purchase in 2014, carcase weight prices in Victoria for dairy boner cows were around 200-210c/kg, over the hooks. Even by the end of 2014, that price had risen above 300-320c/kg, and last year shot-up further to +400c/kg.

“Profitability changed dramatically for us during 2015, making it very hard to re-start operations this year,” Mr Jiang told Beef Central.

At one point last summer, Tabro also attracted attention for late payment on slaughter livestock, an issue the company said was now resolved.

Recently the business had been killing smaller runs of cattle two or three days a week at Lance Creek.

Mr Jiang stressed during his presentation in Melbourne today that Hengyang Group remained committed to its Australian processing investments, and in fact had plans to vertically integrate into acquisition or joint venture of feedlot assets, and cattle producing farms.

Tabro had spent roughly $10 million on both processing plants during the Christmas shutdown period to lift efficiency and performance, ranging from pre-slaughter handling facilities to cold storage infrastructure, and X-ray and fat analysis equipment. Hengyang also installed the latest freezing technology to assure better quality of high-end products. Total investment in the Australian operations, since the original purchase, now amounts to $13 million.

“We consider they are now much better facilities than when we started,” Mr Jiang said.

At the same time, the parent company had made investments in Brazilian Argentinean and Uruguayan processing assets. Expansion was also taking place in the Chinese market, with new boning facilities, processing facilities and value-adding infrastructure.

New focus on higher quality cattle

Part of the company’s revised plans will be on reducing its production emphasis on lower quality manufacturing type beef exported to China, Japan, US and Korea, replacing it with more high-quality grainfed and premium Wagyu beef kills for chilled beef production.

Mr Jiang was an interested onlooker at the 2016 Australian Wagyu Association conference in the Hunter Valley several months ago, and had now established supply relationships with Wagyu producers.

“There is no doubt that there is a growing market in China for high-end Wagyu type beef, which we are not producing at the moment, but which we see opportunity in,” he said. “Many Chinese consumers already have a high awareness and high-appreciation of Wagyu.”

“It’s likely that we would export Wagyu not only to China, but also other export destinations like Japan, Korea, Taiwan and Hong Kong,” he told Beef Central.

The 640-a-day capacity Lance Creek facility already holds an export license for the China market, and the company is working on gaining access for Moe.

Tabro’s earlier exports of conventional beef to China last year were both in boxed meat and quarter beef form, the latter being boned-out in company boning rooms in China. The longer-term strategy is likely to see greater emphasis on quarter beef.

Future in higher quality beef

Earlier, the manager of Hengyang Group’s international business department, Mr Meng, told journalists that the future competitiveness of Australian beef would come more from higher-end products, due to the ‘lack of performance’ of low to middle-end (commodity-type) beef.

“The completion on low to middle range beef products is intense because South America has cheaper priced beef products in this category,” he said.

Hengyang Group’s recently acquired plants in Argentina, Uruguay and Brazil would in future provide the low to middle range beef products, while Australia would concentrate on higher quality products.

He said Hengyang Group had established a network in China with tens of thousands of sales outlets.

Hengyang Group operates 12 plants across China, up to 50,000sq m in size. The company expects China’s current rate of boneless beef consumption – 7.8 million tonnes in 2015 – to increase by at least three percent each year.

Jack Jiang told today’s Melbourne agribusiness gathering that Hengyang Group had focused its investment attention on Australia for a number of reasons:

• The earlier food safety incidents in China, creating demand for products from ‘clean-green’ sources.
• A shrinking cattle population in China, and growing beef demand
• Price differences between imported and domestically-produced Chinese beef
• Australia’s strong international image as a source of safe, wholesome food products.

The company chairman had paid a visit to Australia in 2013, and a deal was struck with the Brorson family for the purchase of the Tabro business, completed in May 2014.