With some of Australia’s largest and most successful agri-businesses already in WA, additional investment means farmers further capitalising on the state’s already-strong export markets.

The agricultural sector in Western Australia is poised for boom times, spurred by its proximity to Asia, vast untapped water supplies in its under-developed north and a growing reputation as a source of premium quality, fresh, clean and green food.

Agriculture has also been highlighted by the state government as capable of expanding three- or four-fold in economic significance, with a major push to further develop it backed by some of WA’s most prominent business leaders. These include Fortescue Metals’ chief executive, Andrew Forrest, and Hancock Prospecting boss Gina Rinehart. Both of them have now diversified their mining interests into large-scale agricultural production and processing.

 

LONG PEDIGREE

Agriculture is by no means a sunrise industry in Australia’s western-most state, though. Total rural and food exports from WA exceeded A$7.79 billion in 2015.

WA is currently home to some of Australia’s biggest farm and rural export companies, including Australia’s largest grain exporter, the CBH Group co-operative, along with Australian Stock Exchange-listed Wellard livestock shipping company. Also in WA are the Mareterram seafood and agricultural group and the Delroy avocado and Craig Mostyn agribusiness empires. Alongside them, the Holmes a Court family’s Heytesbury cattle and Vasse Felix wine estates are state-neighbours with Andrew Forrest’s recently acquired Harvey Beef.

Listed retailing giant Wesfarmers, which owns the vast Coles supermarket chain, is also based in Perth and, as its name suggests, started life 102 years ago as a local WA farmers’ cooperative.

 

INFRASTRUCTURE INVESTMENT

These days, the 50-year-old Ord irrigation scheme is well and truly shaking off its perennial ‘white elephant’ tag. Located near Kununurra, in WA’s far northeast, the scheme is fed by the massive, artificially-created Lake Argyle.

The Ord’s fertile, irrigated farming zone has doubled in size in the past three years, growing new crops such as chia, sandalwood and sorghum. It may also soon become home to a state-of-the-art sugar and ethanol refinery.

Meanwhile, the Ord region has benefitted enormously from recent foreign investment from agricultural companies such as Shanghai Zhongfu, trading as Kimberley Agricultural Investments, which has spent more than A$700 million developing new irrigated fields under long-term government leases.

Shanghai Zhongfu’s involvement has been followed by keen interest in the East Kimberley from other Chinese companies, with new investment set to reinvigorate tourism in the region, upgrade Kununurra airport, and expand Wyndham Port to cope with much larger volumes of agricultural exports from the north.

More irrigated agricultural expansion projects are also underway in the Pilbara, Gascoyne, Carnarvon, Exmouth and West Kimberly regions, while new irrigation dams are being discussed for the Fitzroy River plains. A flood of private investment into WA’s vast northern pastoral stations is thus turning once undeveloped outback cattle stations into much more highly-productive businesses.

Andrew Forrest, who grew up in the Pilbara, told InFocus recently that he believes the agricultural expansion and development boom in WA has only just begun.

“Could WA double or triple its agricultural produce? Absolutely,” Forrest says.

 

HUNGRY ASIAN TIGERS

The growing demand for food and rural produce from WA – part of a predicted doubling of Australia’s total A$49 billion agricultural exports to more than A$100 billion in the next 15 years – is being driven by forecasts of a doubling of food consumption in China and India by 2050, and a four-fold increase in food demand by Australia’s nearest neighbour, Indonesia.

As Asian economies grow in size, their middle class expands. Typically, this means more demand for higher-value animal proteins, such as beef and dairy products. Diets also become more Westernised, a greater variety of fresh fruit and vegetables is bought, while consumption of luxury foods such as wine, champagne, high-quality steaks, prawns, lobsters and fresh seafood also soars.

Thus, over the past decade, total food imports for China, India, Indonesia, Japan and South Korea have grown from around A$100 billion to nearly A$250 billion, a phenomenal and sustained annual growth rate of more than 10%.

 

STRATEGIC LOCATION

Part of the reason that WA is emerging as a key region for capturing some of that Asian growth is its advantageous location compared to Australia’s eastern states.

Perth is physically closer to Indonesia than it is to Sydney; its northern regions closer to Malaysia and Singapore than Melbourne – significantly reducing both flight and shipping times.

Thus, WA’s rural exports to member states of the Association of Southeast Asian Nations (ASEAN) were worth A$2.65 billion in 2014-15. Total agri-food exports from WA to China were worth A$1.83 billion, with barley the highest value export commodity at a massive A$822 million, followed by wool (A$416m) and canola (A$204m).

Small wonder WA is widely seen as a key gateway to Southeast Asia for food and rural exports, helping the state attract significant inward investment in agriculture from Asia. The state’s own agri-food companies are also making the most of the promising marketing and processing opportunities in the ASEAN countries.

Trade with Indonesia from WA last year, for example, soared past the A$1 billion mark for the first time, with wheat exports through farmer-owned giant CBH and its booming joint venture processing subsidiary, Interflour, making up more than 95% of that bilateral trade.

CBH Group chief executive Andrew Crane identifies another of WA’s comparative advantages – its relatively small population of just two million people.

This small size means larger amounts of locally-grown produce are available for export, rather than being consumed within either WA or Australia. In the case of grain – at A$4.5 billion, WA’s largest agricultural export – more than 80% of each year’s annual harvest is exported, reaching 50 countries worldwide.

“In Western Australia, we produce 12 to 15 million tonnes of grain a year and we only need 300,000 tonnes to feed the state,” Crane explains. “So we’ve become known as a reliable origin of grain for Asia and the Middle East, which overrides any seasonal volatility.”

Specifically, Indonesia is WA’s top wheat export market, worth over A$500 million a year. WA is the world’s leading supplier of premium malting barley to China, the major supplier of wheat for the Japanese udon noodle market, and a major feed barley supplier to the Middle East.

State Agriculture and Food Minister Dean Nalder also believes WA’s unparalleled location on the geographical cusp of the Asian food boom, and its multiple agricultural climatic zones that allow almost any food, fruit or vegetable to be grown somewhere in the expansive state, bestow a pivotal trade advantage on WA that must not be squandered or wasted.

“WA is well placed to continue to grow our agricultural exports to Asia. Not only do we benefit from our close proximity, but we also have the benefit of our reputation as a producer of safe, quality food,” Nalder told InFocus.

 

EXPORT CASE STUDIES

Troy Setter is chief executive of the giant, UK-owned agribusiness, Consolidated Pastoral (CPC). This has 385,000 cattle and 20 properties spread across northern Australia, with two of them in the Kimberley.

He says northern WA’s proximity to Indonesia has been pivotal to his company’s success.

Key to this too has been the full resumption of live cattle exports to Indonesia, combined with rising prices paid for Australian cattle exported from northern ports such as Wyndham, Derby, Darwin and Townsville.

“We’ve got two feedlots in Indonesia, are investing further there and we plan, over the next couple of years, to double the number of cattle that we send from WA to those two feedlots in Indonesia,” Setter says.

“Having a strong presence and being asset-heavy in northern Australia, especially in WA’s north, is critical to us; it is a great place to breed and rear cattle, but not finish them – so having the feedlots in Indonesia combined with our Australian properties matches cheap production with cheap finishing and puts the processing where the customer actually sits for us, which is Indonesia.”

Elsewhere, listed Australian live export company Wellard is based in Fremantle, with its five livestock carrying ships operating around the globe. These frequently carry cattle from Australia’s northern ports to Indonesia and Vietnam, or Australian sheep from Fremantle to the Middle East.

In 2014-15, cattle valued at about A$67 million were exported live from WA ports to Indonesia – including some of CPC’s stock – with a A$36 million live export trade between WA and Vietnam. A new live export cattle trade to China from southern Australia is just about to start, with Angus-cross breeds exported from south-west WA via the Fremantle docks.

 

LAND OF PLENTY

But WA’s food and agricultural exports to Southeast Asian countries are about much more than just live cattle, beef and grain.

Last year, A$424 million of live lobsters (crayfish) were exported from WA to Vietnam and China. Large volumes of mangoes, fresh fruit, sorghum and chia from the Ord irrigation area and apples, avocados, tropical fruits and vegetables also head direct to high-value export markets in Asian every season.

WA’s wine industry is another beneficiary of the Asian dining boom; exports of WA-grown wine grew 20% in 2015-16, with the strongest growth markets in China (up 23%), Singapore (up 28%) and Hong Kong.

The quality of wine sold – and price point – is also moving upwards, as Asian wine drinkers become more sophisticated and experienced, with 57% of WA’s wine exports – mainly from the Margaret River and Southern Forest regions – now classed as premium wine, with an average value of A$15.15 a litre.

David Lock, chief executive of newly-listed agribusiness and prawn fishing company, Mareterram, is building the growth of his business on the back of WA’s rural and seafood produce story.

Wild prawns caught sustainably in Shark Bay near Carnarvon are the commercial backbone of Mareterram, with small prawns sold to Spain, large prawns to Japan and medium prawns supplying the local Australian market.

China is a possible future market, with wealthy buyers there prepared to pay a significant premium for Western Australian seafood, as long as it is fresh, not frozen, high-quality and preferably wild catch.

 

CHINA RISING?

At the same time, “I don’t think China is the panacea for Australian food that many people have painted it as,” Lock cautions, “because often they will not pay top dollar for most [food] products.

“For specific items, they will; I think for high-end seafood, and particularly wild caught seafood products that Australians don’t really value – lobsters, abalone, sea cucumbers, scallops, crabs those sorts of products – there is a lot of opportunity and export potential because it really is perceived to be clean and green.”

“If you look at lobsters, there would hardly be a lobster that is sold domestically from the Western Australia catch. It would all go export and most if not all of it would go into China, because it’s quick and easy to get it out there, there’s no production or packing costs and China will pay a significant premium, up to $160 a kilogram.”

Meanwhile, Forrest, who has strong Chinese business links, would like to see more cooperation between Western Australian agribusinesses to really seize the vast Asian food marketing opportunities.

Two years ago, Forrest was key in establishing the Australia Sino One Hundred Year Agricultural and Food Safety Partnership (ASA100). This is pushing for all Australian food exporters to market under a joint, Australian brand. A single logo or stamp that all producers use on their exports would clearly identify them to discerning Asian consumers looking for quality and safe food grown in clean, green outdoor environments, as Australian-grown.

Forrest also would like to see a special Australian free trade or bonded zone established on the Zou Shan Islands near Ningbo city, across the gulf from Shanghai. This would centralise shipping and storage, improving transparency and cutting down on import paperwork and red tape – especially important for perishable food consignments from Australia. The Zone would also operate to Australian agricultural and food, health, and quarantine standards, “freeing up the flow of beautiful, clean, safe, reliable food to the Chinese population, which is great for Australia as well,” he says.

“Food appreciation is only starting, so the origin of food has become a question asked more and more by consumers across the world, particularly across Asia and definitely in China,” Forrest adds.

The Australian entrepreneur, who two years ago bought large WA cattle processing company Harvey Beef with a view to turning it into the pre-eminent supplier of WA beef in Asia, said when China’s Premier Li Keqiang supported the establishment of the ASA100 group, it signalled across Australia that China was really serious about buying Australian food.

“If we market ourselves consistently as one country,” he says, “and we come together under one over-arching brand and under one logo – collectively market ourselves as Australia – we’ll do really well; [our share of Chinese markets] will double or triple.”

“That means that if you walk down miles of aisles in Chinese and Asian supermarkets you will see an Australian logo with an Australian brand which is easily recognisable; that you will [associate] with Australia as a big green land with beautiful blue skies, surrounded by clean oceans and populated by really smart people who eat the best food and have the cleanest and highest quality food.”