KIMBERLEY pastoralists have been offered a cut in Australia's most remote beef processing facility, after the only northern-based abattoir announced it would remain shut this year.
Record high cattle prices was the driving force behind Yeeda Pastoral Company's decision last month.
Yeeda co-founder and executive chairman Mervyn Key said based on current processing prices, processors were losing about $250 per head of cattle, which was a situation "unlikely to change much" for the remainder of the season.
Mr Key said worldwide meat prices had remained fairly static with many restaurants and service industry purchasers being forced to close or severely restrict services over the past year due to COVID-19.
"We have decided not to open Kimberley Meat Company (KMC) this year and instead focus on our six Kimberley stations," Mr Key said.
"That is by selling our cattle mainly to east coast pastoralists, who are restocking their herd after years of drought and thereby taking advantage of current record high prices, which are not sustainable.
"The decision to invite other pastoralists in the north to part-own the beef processing operation reflects the rapidly changing cattle industry dynamics, which are currently dominated by supply shortages, record-high cattle prices, seasonally low US beef trim prices and increased scrutiny of live cattle exports.
"It would enable pastoralists to process the majority of their own cattle in a cost-effective, profit-sharing manner."
Mr Key said following COVID-19, credit had been easier and much cheaper for pastoralists to obtain from lenders, which had enabled restocking over east.
He said that had led to the shortage of cattle and consequently the dramatic price increase.
"All processors across Australia are impacted by this, namely having to pay high prices for what cattle they can get," Mr Key said.
"Apparently the normal cattle herd in Australia is about 27 million, but after the drought it shrunk to 23m."
Yeeda plans to open KMC in March 2022 under the restructured ownership model.
The processing facility and equipment will be leased to a new company on a long 30-year lease under a co-operative structure.
This structure would have about six to seven members/shareholders, including Yeeda.
Those members each will commit a minimum number of cattle to be processed each year.
Mr Key said that would ensure maximum economies of scale and profitability for all the members, as for a processor to operate effectively it needs consistent volumes.
He said the member/shareholders would all control the direction and decisions of the new operating company, relative to their respective shareholdings.
"The entry investment price for shareholders to invest in the operating company will be minimal (and merely confined to start-up working capital) as the new operating company will be asset light (other than its long lease)," Mr Key said.
"It is a safe channel for their product, free of any live export regulations or dependent on trucking animals long distances.
"The new operating company would buy additional cattle from the area for processing in order to make up numbers to run each year at full capacity.
"Members could also elect to have some or all of their cattle contract processed and packed in their own branded boxes for export or local consumption."
To date, Mr Key said the concept had been discussed with several pastoralists in the Kimberly and Northern Territory and had generally received positive responses, as well as further ideas.
He said restructuring of the operation should be finalised by the third quarter of this year, in time for next year's proposed start-up.
Pilbara Cattlemen's Association chairman David Stoate said it was disappointing the abattoir would not be opening this year.
He said since its inception the Kimberley Meat Company had been an important part of marketing options for producers in the north.
"The impact should not be too significant this year due to the relatively high cattle prices," Mr Stoate said.
In the future this could change.
"Ultimately without the facility prices received by producers in the north will be lower," he said.
"It is always in the interests of producers to have as many marketing options as possible."
Mr Stoate said the co-operative model concept was "certainly interesting" and "worth exploring."
"It could work," he said.
"Ultimately whether it is supported by pastoralists in the north will depend on how it is structured and how much it will cost to get involved."
