Investing in abattoir capacity and new facilities in WA may offer upside, but the reality is more challenging for those that can’t scale up.
DEMAND for processed meat products from Western Australia is strong and growing, as the local sector sets the table to consolidate its long-term presence in the state.
The increasing wealth of Australia’s trading partners, a host of free-trade agreements, and a pressing need to process more sheep onshore are drivers of this demand, while issues regarding worker accommodation and regulation remain top of mind.
Data from the Western Australian Meat Industry Authority suggests abattoir throughput for cattle, sheep, and lamb is booming, with processing for each livestock class above pre-COVID levels in the 2023-24 financial year.
It suggests there is ample reason for existing abattoir owners to expand capacity and for new ones to be built.
Some of the state’s big players – Craig Mostyn Group, WAMMCO, Western Meat Packers, and Harvest Road – are investing in new and expanded facilities.
For the whole industry, the logistics either side of processing remain problematic.
There is a pressing need to smooth out the supply chain into abattoirs and improve trade route access on the way out.
At the other end of the scale, small processors are struggling under what they argue is a heavy-handed regulatory regime and extreme cost pressures.
Small paddock-to-plate farmers are feeling the impact of tight processor margins.
In September, a decision by Dardanup Butchering Company to end its custom-kill service thrust a slow-burning issue facing meat processors into public view.
Custom kill saga
Custom kills, also known as service or contract kills, have become a hot-button issue for the industry following the Dardanup decision.
DBC’s service for small farmers will end in February and running it until then is costing the company a significant sum, according to half-owner Westpork.
Western Australian Meat Industry Authority chief executive I-Lyn Loo said it was a myth that large processors did not do service kills.
“The bigger abattoirs process service kills, for example, for Dorper lamb, for Dirty Clean Food,” she said.
“One of the larger abattoirs told me it costs them between $5,000 and $6,000 to shut down the line for a service kill.
“If you have very few animals, it’s spread over very few numbers. Whereas if you have got a consistency in supply, then cost efficiencies are spread.”
Ms Loo said that was the message she had given small farmers affected by the DBC decision.
She said they needed to cooperate and offer sufficient volume and consistency to ensure larger abattoirs would accommodate them.
To that end, a group of small producers registered a company named Small Farmers WA this month, which they intend to run as a co-operative.
Ms Loo said WAMIA was also working with agricultural colleges and probing the viability of micro and mobile abattoirs to provide options for small producers.
Craig Mostyn Group, which runs the nearby V&V Walsh abattoir, has reduced service kills for its bigger customers; a decision chief executive Wayne Crofts said came down to capacity constraints.
“That is why we are doing the upgrade to wastewater … that business case is coming through to the board in December,” he said.
“At this stage we have still maintained all our customers, although we have had to reduce some of their volume, and we have just dialled up the dialog with the departments.
“[T]hey haven’t approved an interim uplift for us, but we’re hoping that in time, maybe they will.”
Demand & supply
Craig Mostyn Group is one of the biggest investors in the sector at present.
The group opened a $50 million cold storage facility at its V&V Walsh abattoir in May, a $25 million pork processing expansion this month, and is building a poultry processing line at its Talloman rendering plant in Hazelmere.
Further investment is being made to automate operations at its pork slaughter room, and in V&V Walsh’s wastewater and biogas facilities, to reduce production costs, improve waste streams and lift capacity.
“That will take the pork business to world class and will see us have excess capacity to deal with any growth or opportunistic supply that may become available,” Mr Crofts said.
“The demand is absolutely there; we can’t get enough products through. But we and most abattoirs are limited in WA at the moment, based on environmental regulation, which is capping production.
“Our [lamb] process volume has already increased thirty per cent in the past three years, so we are already dealing with a lot of the volume of live sheep.
“To go to the next level, we need to debottleneck ... on environment, around supply chain and ports, and then around working with farmers on better backgrounding and feedlot facilities.”
WAMIA figures show lamb throughput at abattoirs is up 15 per cent since 2019, sheep up nearly 30 per cent, and cattle up 6 per cent.
About 3.3 million lambs were processed last financial year, up 80 per cent from 2020 when COVID took its toll on exports, logistics, and staff availability.
These figures come amid confidence in overseas demand for boxed beef products and sheep meat from WA.
However, supply uncertainty remains due to the differing policies of the federal government and opposition over the future of live sheep exports.
Labor plans to shut the trade down in 2028; the Coalition has vowed to overturn that decision.
That means next year’s federal election has major investment implications for sheep processors, which is tough when decisions on capacity funding need to be made well ahead of the current mid-2028 deadline.
Mr Crofts said regardless of live sheep policy, investment in feedlot and backgrounding (transition phase pre feedlot) was needed to improve the business case for processing sheep and lamb.
“[Politicians have] to acknowledge that if one government says do it and the other government ... overturns [the decision], and we spend all this money, it puts us in a pretty difficult spot,” he said.
“The three major processors in the state can absolutely manage the remaining volume of live export lambs, but if you look across the value chain, there are changes required to smooth out the supply of that.
“One of the biggest issues in WA is getting product out; there is congestion at ports and there is congestion at airports, which make us inefficient and increases our cost of freight.
“A great example is what they have done at Toowoomba in getting freight airlines in and out.
“They can turn those planes around within less than a couple of hours, so there is a great opportunity with air traffic, I think, particularly given our location relative to South-East Asia.”
Data provided by Craig Mostyn Group showed lamb airfreight costs from WA to the Middle East were between $24 and $32 per 20-kilogram carcass dearer than the east coast.
Ms Loo said accommodation, regulation and airfreight were among the most pressing concerns for the industry.
She said high regulatory standards were there for a reason.
“We want to make sure that there’s confidence in our industry; we want to make sure that our export markets have confidence in us, that our meat produced here is safe to eat, and is underpinned by good ESG accreditation,” Ms Loo told Business News.
“It is a myth that it is the federal government wanting all these things; it is actually the export markets driving it.
“We are working with the Department of Water and Environmental Regulation very closely to make sure there’s transparency in the regulations on how people can go through the process, because sometimes that transparency can just help.”
Regulation headache
Corrigin Meatworks has been operating in the Wheatbelt town for more than 100 years.
These days it is owned by farmer Linton Batt, who bought the facility so he could process his prized Berkshire pigs.
“My driving passion is producing pigs,” Mr Batt said.
“I love breeding pigs, and I couldn’t find the slaughtering capacity when I needed it.
“I understand that the larger processors can’t work around our schedule. I get that. So, we needed a small volume, small-scale processing option.”
The abattoir is busy – booked out two months in advance, mostly for service kills – but it is not making money.
It is operating at about 30 per cent capacity and slaughters one or two days per week, due to what Mr Batt said was the cost and complexity of adhering to regulations required to increase capacity.
“To get the workflows that we need, we need to make some structural changes, and they’re very minor, to the building,” he said.
“But to get those approvals, because it’s an abattoir, it’s a very complex process; very slow, very expensive, and not cost effective.
“We support having a regulated meat industry. It’s part of the food process, we understand that. But the devil’s in the detail.
“It is not cost effective for us to expand, and the frustration is there are other small producers that need a small facility to harvest their meat.”
Examples Mr Batt provided included the high cost of waste removal, a carcass inspection regime that didn’t account for small throughput abattoirs, and costs of up to $50,000 just to prepare for the next licence tier.
Mr Batt does not want to build a large abattoir, but rather said he was happy processing local meat for local people.
However, a decision on the future of Corrigin Meatworks may have to be made on finances, rather than passion.
“We are right in the middle of deciding [if we] shrink that operation [to] where we just slaughter our own livestock … or do we make other changes where we can slaughter five days a week,” Mr Batt said.
“The planning and approvals process is far too cumbersome for us to consider that.
“We have been given indicative numbers we just can’t justify for a small business. But once we achieve that, and I’m sure we will … it is the ongoing cost of compliance to prove we’re not doing anything wrong that would be another major overhead.”
Mr Batt said streamlined approvals and a review of throughput limits would be required to service a growing population and export markets.
Without reform, he added, the issues facing small abattoirs would give rise to more illegal backyard slaughtering and contribute further to low sheep prices.
Mr Crofts said the relationship between regulators and processors had improved with the appointments of Alistair Jones as DWER director general and Liam O’Connell as the department’s statewide delivery executive director.
“All of a sudden you can have quite a pragmatic conversation about what you want to do,” he said.
“There is pressure across lots of industries in terms of working with regulation, because some of the changes coming at us we haven’t really seen before.
“When you talk about some of the reductions in emissions and things like that, and the changes in reporting; as with any change comes challenge and uncertainty, and with that comes anxiousness.”
Secret business
Another issue for the sector is transparency.
One of the best sources of industry information comes courtesy of a website designed by a group wanting to close all abattoirs.
Many abattoir owners simply did not answer calls or emails from Business News, and some didn’t even have a way to get in touch.
Details are scarce on many operations, including Minerva Foods, to which this publication has reached out numerous times in recent months without success.
The Brazilian company closed its Shark Lake Abattoir in Esperance last September, saying at the time it would review the plant’s investment needs as part of a determination of the facility’s future.
Minerva’s media and general contacts in Australia and Brazil are unresponsive, its listed Australian phone numbers are disconnected, and its senior staff did not return calls.
Elsewhere, Western Meat Packers Group did not respond to several requests for comment on the state of the Goodchilds Abattoir.
Two years ago, the company said the facility would be reopened in 2024, but it did not appear operational when Business News drove by last month.
Canada’s Alberta Investment Management Corporation (AIMCo) did not respond to questions about its interest in the Kimberley Meat Company, the purchase of which (out of receivership) requires regulatory approvals.
The Kimberley Meat Company abattoir was high on AIMCo’s priority list in August when the Canadian corporation was revealed as the buyer of Yeeda Pastoral Company.
“We believe this acquisition gives us the opportunity to create a vertically integrated beef production and processing business in northern Australia,” AIMCo executive general manager Ben Hawkins said at the time.
“AIMCo has a strong track record of investing successfully in the Australian and New Zealand primary production and rural land sector, and are committed to ensuring strong animal welfare, environmental, social and governance standards are put in place.”
There is little doubt AIMCo has the financial muscle to invest in the processor: the corporation had $CAD260 million ($287 million) in liquidity and more than $CAD2 billion ($2.21 billion) in assets as of September.
The sale is waiting on approval from the Pastoral Lands Board and Foreign Investment Review Board.
Also unavailable were the new owners of the mothballed Clover Meats in Waroona, who have flagged reopening that facility.
Spud king Tony Galati’s Galati Group did not respond to claims he wanted to build an abattoir in Muchea.
Galati Group bought a 120-hectare property in Muchea for $6.5 million last year and the company has history in this space.
In 2021, Mr Galati considered taking a stake in Kimberley Meat Company, which ran the only large abattoir in the north-west until it fell into administration last year.
Back to life
Of 11 closed abattoirs, five are slated for reopening, and another is being investigated.
Business News confirmed Central Agri Group intends to reopen the dormant Joanna Plains abattoir in Cataby and Alqudsi Agri Group is still fixing its facility in Geraldton.
Work has also begun to determine if the Manjimup abattoir can be brought back to life to cater to small producers who will lose DBC as a service-kill site in February next year.
However, several industry players have suggested this proposal appears unlikely to proceed.
Elsewhere, in October Westpork flagged construction of a new processing facility at Picton, which could meet some demand for service kills.
Western Meat Packers and Coles last year finished a $35 million boning and packing facility upgrade at Bibra Lake, while WAMMCO is investing $50 million on kill infrastructure at its Katanning abattoir.
