AACo Beef Processing facility.

In late March of this year I had the chance to visit the site of the new abattoir being constructed by Australian Agriculture Company (AACo) 50 km south of Darwin, at Livingstone, Northern Territory. By my reckoning the only brand new abattoir built-in Australia from scratch for at least the last 60 years.

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The site when I visited represented a crazy meccano set of construction, with lots of big boy toys, plenty of activity, people everywhere and skeleton shapes of the large buildings which will make up the process and facilities of the plant.

 

B.Cooper. 28.03.14_edited-2

Source – Photo AACo. Article – ‘AACo abattoir set for spring start’ The Land. 28/03/2014
I have labelled some of the infrastructure in place in March 2014. Animals will enter the facility at the slaughter point to be processed as they move up the photograph. I have the ‘packing’ label position slightly wrong, it should be to the right. Storage is the Freezer areas.

Once the main buildings are finished much of the internal work has been pre-fabricated at other sites, it will be transported in and installed. Stock yards and cattle holding facilities are yet to be built and the actual slaughter box site was only just begun. Completion of construction and beginning of processing of cattle is planned for September 2014.

 

14.04.14 089_edited-1Source. Jo Bloomfield. March 2014.
Where the bobcat is working is where the slaughter box will be built with its surrounding building yet to be constructed. The building in the centre is where the main processing of the carcasses will occur.

Obviously AACo and the Sunbuild construction people know that pastoralists are a bunch of sticky beaks and veritable excited children around new sheds. We do tend to go all gooey eyed at steel bundles, shiny new engines and large machinery. We were allowed access on very strict OH & S requirements. Tightly corralled behind flimsy hazard tape like a too small holding pen. More than once I heard the promise of future tours once the plant is functioning, the interest in this facility is very high and AACo are keen to have producer involvement and observation of the processing of  cattle occur when the plant is in operation.

 

14.04.14 100_edited-1
Source Jo Bloomfield March 2014

The AAco beef processing facility will have a co-generation plant, powered by gas that will supply the plants electricity needs.

To give a brief history of the AACo organisation, it was established in 1824, not only is it one of Australia’s oldest Agricultural companies but also now likely the biggest. AACo own about 682,000 head of cattle, about 2% of Australia’s whole current cattle herd. Their operations include extensive breeding operations throughout the NT and QLD covering 7.2M hectares (1% of Australia’s whole landmass). They sold approximately 250,000 cattle in the 2011/12 financial year (ending March) and currently employ over 450 people.

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Utilising a variety of cattle breeds AACo target a large cross-section of markets, grain-fed production, grass-fed and the live export markets.

 

AAco cattle sales #2_edited-1Source – AAco Financials ending 2012.
Types of cattle markets AACo supply.

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Horizontally integrated, meaning they have similar properties or facilities at different sites that perform similar tasks, such as animal breeding and raising happens on 23 cattle stations. They also operate procedures vertically , meaning AACo control various stages of the supply chain from production of fodder, stud animals and the retail of a meat product from another 4 farms and 3 different feedlots in conjunction with the stations.  Soon they will have their own abattoir for processing animals from their north Australia operations once the Livingstone abattoir is finished to further enhance their scalability and asset utilisation. Currently AACo have a number of branded beef products which are processed at plants in mainly QLD which are operated by rivals in the meat industry.

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The AACo beef processing facility proposal was announced to the public in early 2010 with site location not then decided on. Initially the plant was expected to cost $47.5M (Including Government contribution of $12.5M) and capable of processing 140,000 head with the intention always to operate 12 months of the year and not seasonally as most abattoirs in the north were forced previously to do. Initial plans were it was to be operating by mid 2013.

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The plant has never been intended as a replacement to live export targeted animals. The majority of animals to be processed will originate from AACo properties, cull cows and bulls and thus not animals they have bought in but already own. This enhances their own supply chain capabilities and is also a very different aspect of previous NT abattoir operations in that operations at Katherine, Batchelor , Tennant Creek and Alice Springs  needed to purchase all stock to supply their processing requirements.

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By late 2010 early 2011 AACo had raised capital from institutional investors with hopes of raising more to construct the facility. Overseas investors had been sought with the intention that AACo never relinquish majority ownership equity of more than 50%.

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The live export ban of 2011 resulted in a reduction of over $50M of the AACo asset base over the next 2 years, including $11m immediately attributable to the loss of markets and the ban implementation. This severely hampered AACo’s efforts to fund the abattoir. The suspension and subsequent devaluation of properties was negatively compounded due to loss of direct cattle income. This caused some skeptics of the project to predict the abattoir plan at Livingstone would be abandoned, they were wrong!

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In mid 2012 AACo announced they had purchased a site for the abattoir at Livingstone, the budget now estimated at a finished operational cost of $90M with a capacity increase to process 185,000 head and depending on operational performance further development ability to 225,000. AACo making the decision to increase the facility throughput size to strategically capitalise on the locations proximity to Asia and demand for meat, supported by supply of animals in the north of NT and WA of an approximate herd of 2M head.

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AACo cattle sales suffered a drop of 30% in gross values  per head for animals sold from a June 2012, over a 3 month period to a comparative period in 2013. This was pretty much in line with what was happening all over Australia. Cattle markets had generally plummeted due to oversupply of animals because of 2 main factors. The flow on effects of the Live export ban from 2011 and drought. Like most other Australian producers they had also been held hostage to the domestic market and its volatility. Drought and the ongoing effects of the ban exasperated the natural climatic problems, as cattle held from 2011 period which should have gone to live export as smaller feeder animals were now hitting the domestics processing facilities as heavier and older animals. AACo cattle held back 185,000 of their own animals from sale in 2011/12 to be sold in 2013.

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The benefit of the Darwin abattoir will be in its ability to process cull animals that aren’t worth a great deal of money in comparison to steers or other preferred younger animals yet are expensive to sell due to high freight costs and lower yields when processed. Due to costs of sale these animals tend to remain on property, eat grass and yet do nothing, costing money to maintain they actually give no return. For producers like myself located several thousand kilometres from any current processor, the costs of transport could easily be more than the realised sale value of the animal. Add to that market and quotation variances, we may transport cattle without a known set price or even gauranteed recovery of costs of sale and transport once the animal is landed at the destination.

 

distance to abs.This is a very rough indication of the distances our cattle would have to travel by road to specific abattoirs located in the other states. It doesn’t take into account extra time or expense for spelling, unloading, weight loss, costs or losses.

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Ability to cull non-productive females from our herd and removal of unwanted others could be of significant benefit in improving the reproductive efficiency and return on asset of our herds simply by their removal and some realisation of value. Their removal would allow fodder for reproductive and earning capacity animals.

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The real test of the AACo abattoir will be, can and will they match the processor prices in eastern states to attract the suppliers to make it profitabile to process the animals closer to where they are bred and raised. Due to freight cost savings I suspect some processors are very concerned at AACo’s ability to do exactly that. Keep in mind a smaller but still significant facility is being constructed in WA near Broome with similar views of processing non-export orientated cattle. This would affect current processors animal supply chains which they have previously comfortably sourced from literally across Australia. I also suspect that when AACo begins to purchase volumes of cull animals located in the WA and NT areas this may help to bump up the prices offered to producers in other states for their cull animals as demand for them increases. Well I hope so!

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In the future if AACo choose to develop the plant further to a production line processing heavier prime cattle they will need to invest a further $30M+ for cold boning processes. Domestic and live export heavy markets will be what they will be in direct competition against and required to beat to ensure animal supply. Producers can’t be expected to give their cattle away simply because a processor is located in Australia but with the vast improvement in herd quality and improved control now, compared to many years ago I think many producers will be supportive of the plant.

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Lack of supply in northern abattoirs declined in past years as the processors wouldn’t pay the prices of which live export consitently did. The processing facility operations were not competitive due to high costs of operation and transport of product of meat. Many believe and mislead others that live export closed abattoirs across north Australia because it created competition for the product of animals. What many people don’t realise is that some processors were only paying producers $50-$100 for a beast prior to Live export cattle development, that was not sustainable for producers. There are many reasons abattoirs closed across Australia to the present day, massive rationalisation in the early 80’s (costing 10,500 jobs by 1981)1, sheep wool crash, beef crash, meat substitution scandals, illegal, corrupt and poor management, drought, inability to meet hygiene standards, lack of markets, costs of production. To name only a few these  were significant factors that sometimes singularly sometimes combined caused abattoir closures throughout Australia. ( I will get to that blog one day!) Bloody hell I nearly forgot the unions, in my opinion they caused more closures than any other individual factor!

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As time marched on to the current period of 2014, government funding for the Darwin abattoir was becoming increasingly unlikely, to eventually only be for $2.5M for alignment of road entry at the site and improvement of the crossing access of the railway line that was required for access from the Stuart Highway. At one stage $9M had been promised but it never eventuated.

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Very raw figures of a plant with a capacity to kill 185,000 head requires over 1,200 full 6 deck road trains just to deliver the animals. Not taking into account transport of other input goods and services and then transport out of full containers with animal product. Include also the general traffic of 350 workers and their vehicles most days of the week.
Some port improvements for container handling and transfer of containers between ships, trucks and the wharf have occurred with replacement of a crane and other infrastructure.

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AACo had allocated funding for the finalisation of the abattoir beyond the initial stages of construction but then undertook a further capital raising venture, deciding in late 2013 to sell some of its own assets as well as to raise fresh equity through capital share offers. This had a two fold effect it assisted AACo to reduce overall company debt and to secure funding for the purchase of two other properties in the NT,  Labelle Downs and Welltree station. These properties are located approximately 180km from the abattoir and will allow holding and transfer of cattle through wetter periods of the year when direct access from other producers or properties would not be able due to the rainy season, thus enabling better continuity of all year supply of animals.

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Supply and consistency of supply of animals in north Australia was the thorn in the side of all previous abattoirs in existence in the north, the dry season would allow supply of cattle for 5-6 months of the year and then depending on the wet possibly no cattle for long periods due to mustering issues, road access and the general infrastructure of the times.

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Present construction of the Livingstone abattoir is being undertaken by an Australian based company Sunbuild, utilising equipment and expertise from New Zealand and Denmark. The refrigeration and food processing equipment alone is worth $21.5M.

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Employment requirements are now forecast to be about 350 people, with the current expectations to begin operations in September 2014 on a five day processing week, for 12 months of the year.

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AACo have a number of employment alternatives they’re preparing to try

  • Locals, including aboriginal. With the location of the site being about an hour out of Darwin AACo have received significant inquiry from potential employees who wish to avoid the traveling to work in the city area and work closer to their home bases.
  • Shared work to encourage employment of people with school children
  • Sentence to job programs for low security prisoners and
  • 457 visas employing overseas people

AACo are currently calling for employment applications now for pre training and preparation for when the site is operational.

AACo Employment information.

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Initially AACo will process only their own animals to make sure operations and protocols are fully working, it is hoped they will begin to process other people’s cattle towards the end of 2014.

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Animals sourced by AACo will be mostly un-suitable for the live export markets. Live export has specific parameters of breed types, horn, pregnancy and injury protocol that mean many animals perfectly healthy to travel and slaughter aren’t allowed to be exported. For instance in our circumstance we have a massive wild dog problem in which up to 6-8% of our weaners show light to major damage of their hides, ears and muscle through dog attacks. Some of these injuries may be well healed but leave large unsightly indentations and are generally culled from live export lines.

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Another problem here is missing tails, commonly called ‘tail rot’ the cause isn’t fully known but is thought to be one of bacterial, fungal or a parasite that enters the tail mainly due to an injury, especially after a dog attack. It generally stops in the tail and often heals but leaves the animal with a stumpy tail about 10cm long. Live export will deduct the value of an animal by atleast 10c per kg of the whole beast if the tail is missing. These animals may be perfectly fine otherwise and would be suitable candidates for the abattoir.
Bulls, as silly as it sounds often stand on their own pisals, or others do when they are sitting and will permanently damage it, making them worthless for reproduction, they must be culled immediately. Cull cows that may not be right breed type, or requirements of the boats may be suitable to sell to AACo.

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It may develope that supplying cattle to AACo may be less troublesome to producers, especially small ones like my family than supplying the boats, due to bookings and ship space and lots of issues of stock handling. It must be economically viable to AACo and those they buy from, Only time will tell how it all pans out.

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Animals delivered for slaughter are generally expected to be processed within 24 hours of arrival, All animals will be pre-slaughter electrically stunned with the time period from stunning to the meat and products entering freezers to be 45 minutes. Once in the freezers the cartons will be reduced to a minus 15 degrees over a 24 hour period. Red and Green offal and other body parts including the hide will be processed in various areas depending on market requirements. By products such as blood will also be collected for rendering.

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There is absolutely no doubt AACo have had their skeptics right from the start of building this abattoir, many thinking they wouldn’t even get this far. I sincerely hope they do succeed in this venture and have it develop into a profitable long term operation. I definitely hope that I’m able to sell them cattle, but the real proof will be, can they pay a competitive price to producers to enable the continuity of supply. They will face tough competition from other processors already established in other states and the live export markets.

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I hope the beef processing facility at Livingstone is a great success and I wish AACo the best of luck, for not only having the guts to take this on but the vision to plan it and fortitude to stay with it.

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As a final note I have written this article with the intention that it explains facts and real happenings in respect to the beef cattle industry in north Australia from only my perspective. I receive no payment or commission or are otherwise employed by AACo or any other party, I have never been employed by AACo. The only vested interest I have in this abattoir is I hope to sell cattle to it, those being animals not suited to live export and mainly cull cows and bulls. Realistically the small number of animals I could sell to it will have minimal impact on their operations but could be of substantial benefit to my own.

Further information on the timeline of events of the AACO beef processing facility are here – Livingstone abattoir (NT)

Source

  1. John Kerin, Parlimentary website Hansard 20.08.1981.
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Categories: Advocacy, Animal Welfare, Australian abattoirs, Beef Industry, Live Exports, Livingstone (Darwin) abattoir, Northern Territory., Property operations, Uncategorized | Tags: , , , , , , , , , , , , , | Leave a comment

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