The producer-led NorthBeef group which plans to build an abattoir in North West Queensland says it has had a number of positive discussions with potential investors from Asia in recent weeks.

NorthBeef chair, Hughenden beef producer Rob Atkinson, said the group met with three delegations from China at Beef 2012 in Rockhampton, and has another meeting planned with Indonesian investors in the next two weeks.

He said the meetings were still in their early stages but all had been positive so far.

“Nothing has come out of it at this stage, it is just preliminary, but there is definite interest for more beef into China,” Mr Atkinson told Beef Central.

He said the group had been watching the progress of AA Co’s planned $80m investment in a new abattoir near Darwin with interest.

Both projects plan to draw cattle from an overlapping catchment area, particularly in the Barkly and Mt Isa areas, and Mr Atkinson said there were questions as to whether available cattle numbers could sustain both projects.

AA Co’s plans have stalled in recent months as it waits to hear whether required Government funding of $35m to build supporting port, power and highway infrastructure will be forthcoming.

NorthBeef’s hope is to attract a private investor with the capacity to fund all or most of the project’s costs, to minimise the need for support from Government finances, which Mr Atkinson said were clearly stretched. He said the group is yet to commence formal discussions with the recently elected Coalition Government in Queensland. 

The projected costs are significant, ranging from $50m for a straight hot boning plant and upwards to $80-$90m for a facility that incorporates cold-boning capacity to retrieve all high value cuts.

“They are big numbers, and it is obviously hard to find someone who is going to invest that sort of money,” Mr Atkinson said.

“I honestly think it will happen, but I think it will take a while, we have just got to be patient.”

The group says an abattoir in north western Queensland would generate considerable savings in transport costs and shrinkage costs compared to trucking cattle to abattoirs on the coast or in south East Queensland. They also hope further efficiencies can be achieved by shipping containerised beef directly into Asia from Townsville, instead of Brisbane.

Mr Atkinson said a northern abattoir would also provide an important marketing alternative for producers who are currently heavily reliant upon the northern live cattle trade.

“I feel for those producers who depend on live export,” he said. “It is pretty disappointing to see the price of steers out of Darwin is $1.70, if you bring that back to Mt Isa or Cloncurry it is pretty sad as far as producers are concerned.”

Government study

A recent study funded by the Queensland and Commonwealth Government identified Cloncurry as the most suitable location for a new abattoir in north western Queensland.

While the study did not make a direct call on the feasibility of a new northern abattoir, it said the potential to generate supply chain savings by processing cattle locally and the region’s proximity to rapidly growing beef demand in Asia contributed to its potential viability.

But the report also acknowledged numerous challenges, such as the higher costs of operating in a remote location, wet season restrictions on supply, the ability to recruit required labour and the current lack of suitable containerised shipping services from Townsville or Darwin into Asia.

The report also showed that there is no shortage of processing capacity in the Queensland beef industry, with around 4 million head of capacity available to handle an annual kill of 3.3m head.

However, for many northern producers, a combination of transport costs and shrink losses meant this processing capacity was arguably too distant to generate sufficient returns.

The study showed that any new abattoir would, at least in the short term, result in a small reduction in throughput in all Queensland abattoirs, with the JBS-owned plant in Townsville likely to be most affected.

It said the positive outlook for beef demand from Asia meant the potential for the future success of a local processing plant was greater now than at any time in the past 20-30 years.

The plant would need to set prices to attract a steady supply of cattle, while generating a return on the substantial capital involved.

“Producers could expect to see somewhat reduced cattle grid prices but improved net returns through savings in livestock transport costs, shrink losses and MSA premiums,” the study said.

Contact with processors

NorthBeef has also expressed a desire to partner with an existing processor to ensure the plant can draw upon appropriate meat processing expertise.

The authors of the report, released in late February, said they approached several larger Queensland processors and pastoral companies about their interest in becoming involved.

“With one exception, all doubted that they would become involved, but wished to be kept aware of developments and the outcome of the study,” the authors said./

“The one exception was very interested in the prospect of an abattoir in western Queensland and wished to progress discussions with DEEDI.

“Participants acknowledged that moving cattle long distances served neither producer nor processor, and placed Australia at a global competitive disadvantage.

“There was scepticism regarding the seasonality issue.  Particularly during those cycles of prolonged drought and the consequent long distances that cattle would need to be transported if the abattoir were to remain open.”

The report also noted:

• There was scepticism that refrigerated containers out of Townsville port would be viable in the short term, but it would be welcomed if it were.

• It was acknowledged that cattle supply to Townsville abattoir would come under pressure if a north western abattoir came into operation.

• Recruiting, retaining and training labour would be difficult in competition with the mines.

• The prospect of irrigation development should enhance the issues of cattle weight and seasonality.

• Reduced road miles would reduce the carbon footprint of the total supply chain.

Overall, the participants displayed a protectionism of their existing plant locations and structures, while in balance recognising the supply chain costs over large distances were a disadvantage to the global competitiveness of the industry.”

To view the report on the NorthBeef website click here