Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

We now move from spaghetti in South Australia to the beef of King Island—which is what I would like to talk about this evening. I welcome the release of the consultancy report by the King Island abattoir feasibility study group on the possibility of establishing a new abattoir on King Island. This study has been in train for about nine months, since the big multinational meat processing company JB Swift shut down its abattoir on King Island. An abattoir had been operating on King Island from 1956. It was obviously an integral part of the King Island brand—which is very possibly one of the best-known brands not just in Tasmania but in the country.

On a trip to visit the people of King Island in January, I met a number of farmers. It seemed obvious to me that they were quite distressed about the loss of their abattoir not only because of the cost of sending their cattle on trucks and boats across Bass Strait to be processed but also because of the time that the cattle spend travelling, particularly on the trucks—it can take up to 28 hours—before they are processed. Many of these farmers have reared their cattle from very a very young age. The farmers told me that the cost of processing had jumped from $12 to $112 a beast, with the additional imposts coming from having to transport them across Bass Strait. But more distressing than that for these farmers was their loss of confidence and loss of pride in no longer having the ability to process up to 40,000 head of cattle on their own island—which they had been able to do for a considerable period of time before the abattoir shut down.

I looked into why a large multinational like JB Swift would shut down the King Island abattoir. When I asked the farmers, they said it was always JB Swift's plan to shut down the abattoir—but I am not really sure if that is true. The existing abattoir site includes a $3 million state-of-the-art effluent treatment plant, which was partly funded by the Tasmanian taxpayer. What really engaged my interest was the fact that the company refuses to sell the site or the existing abattoir infrastructure. They have gutted the abattoir and taken its infrastructure to other parts of the country. They do not want to sell the site because they simply do not want a competitor on King Island.

I used to teach international finance and work for multinational corporations and so I have got a pretty good idea of how they operate. When I first put the concept to some people that maybe King Island deserved a new abattoir and that the farmers should look at taking control of their own destiny and seizing the initiative, the first response I got was: 'Jeez, if it's not profitable for Swift, how is it going to be profitable for Tassie farmers or King Island farmers?' My immediate thoughts were: I know how multinationals operate. All they are interested in doing is rationalising a portfolio of assets. They would be looking at their returns right across the assets that they inherited when they originally bought King Island. It seemed pretty obvious to me that if they could rationalise King Island, shut down the business, save some costs, increase throughput through their Longford plant, which is across Bass Strait, it would be a lot more profitable for them. They have good capacity in Longford, and Longford was underutilised. They also had other capacity in some of their mainland processing sites. King Island, as a stand-alone operation, might very well have been profitable but, from a multinational's point of view, it had to fit into a large portfolio of assets. It was not really a high performer for JB Swift, or they could have got better performance from their other operations by shutting down King Island.

This intrigued me: could it be profitable as a stand-alone operation? When I talked to the farmers they said, 'Buggered if I know'. They said: 'We don't really know. It is not our area of expertise. The government should build us a new abattoir.' I said, 'I don't think the $20 million or $30 million that it is going to cost for a new abattoir should be funded by the taxpayer. You should do it yourself. If you really believe that an abattoir is going to be profitable you should look at doing it yourself, particularly when you offset the high costs that you are having to pay for transport.' They said, 'All right, where do we start?'

The government had for six moths promised to do a feasibility study. I said to these farmers, 'You can wait for the government to do a feasibility study or you can do your own.' They said, 'Where do we start?' I said, 'I know a few people who can help you.' A month later I went back with a couple of mates who were investment bankers. We sat down with the King Island farmers and had a very good evening with them—with crayfish, red wine, beef and other things. We had a discussion. The more we went into the numbers, the more my friends were excited about the possibility of a new operation being financially viable.

It might have been a coincidence, but the next day the government arrived with a task force and appointed a consultant. That consultant delivered the report today, and I am very glad that the Tasmanian government pursued the issue and put money into the consultancy report. It showed us what we had intuitively sensed was an opportunity. If the farmers were to buy in, put their cattle through a new abattoir—and we are assuming that JB Swift is still not going to sell the existing abattoir on the land—get behind this project, manage their own brand and take some control of the supply chain, this project could not only be profitable and marginal, it could actually be highly profitable.

The report was released today. It is a large report. It cost $48,000—a co-contribution between the King Island Council and the government. To me, this is a big source of optimism because, if we can do this on King Island, there is no reason that we cannot do this in other parts of Tasmania. It is really about farmers looking at alternative ways of getting their product to market and owning their brand.

If you look at the 100 per cent value of a piece of King Island porterhouse on the supermarket shelf, $10 out of $100 is the abattoir processing cost. After taking into account the costs of growing cattle and transporting them to market, a King Island farmer walks away with about $50 out of that $100. The other $40 goes to the distributor and the value-added that the retailer gets out of the brand. These numbers are readily available. They have been looked at by the consultant.

It is pretty obvious that if the farmers could get their own value chain and own that somehow, this could be a very viable proposition. We are at the stage now where the farmers are potentially interested in funding this themselves, because they have got the cost offset from increased transport and they can see that there is big potential to make this highly profitable. This has not even assumed a lot of the other add-ons that we believe could be really positive for an abattoir on King Island, like processing local wallaby, which, as we know from Flinders Island, there is a huge market for. We also know that poddy calves from the local dairy can be processed through this abattoir, and that other older cattle that do not have a market are currently put down and buried and not sold at all.

We also looked at the possibility of making a green abattoir and processing waste into energy and by-products. When we start adding all these things together it looked like a very exciting idea. I am very optimistic tonight, because we have a good bunch of active farmers who are hurting from the higher costs and they are at a stage where they feel like they can put their hands in their pockets and do this themselves. It will be a really good case study for other agricultural industries in Tasmania. It was only very recently that another multinational, Simplot, ran into trouble with frozen vegetable processing in Tasmania. Of course, a large number of farmers are reliant on selling vegetables to Simplot. They are essentially selling a commodity and the value they have been receiving has been diminishing over the years. Once again, farmers are starting to ask themselves: 'Are there other ways we can get our product to market? How do we do that? We do not have the expertise or the training. We have grown vegetables this way for a large number of years,' et cetera.

There is an opportunity in my state, as I am sure there is in every state, to start exploring different ways of helping agricultural producers get their produce to market and get much higher margins. King Island is a great place to start because the brand is so well established and they can command a significant premium for their beef, particularly in Asian markets.

We are optimistic that JB Swift may still maintain its operation in its Longford plant in Tasmania, but we are very interested in progressing this to the next stage, and we are certainly hoping that local farmers will continue to be positive and will help this project get up, to take control of their own destiny and to see the King Island brand return to its previous glory.

Senate adjourned at 22:18