Department of Agriculture and Food

Investment opportunities in Western Australia’s

sheep meat industry

Contents Investment highlights ................................................... 3 Executive summary ...................................................... 4 Industry overview ......................................................... 5 Market analysis ............................................................ 8 Details of potential investment opportunities ............. 12 Financial analysis ....................................................... 17 Key risks and mitigating factors.................................. 18 Other important information........................................ 19 How to progress.......................................................... 19

Investment opportunities in Western Australia’s sheep meat industry  |  3

Investment highlights The Government of Western Australia, through the Department of Agriculture and Food, Western Australia (DAFWA), is committed to working with local agri-industries and investors to capitalise on current market opportunities to produce and sell high quality foods through safe, efficient and secure supply chains. This business case outlines potential opportunities for investment in current and future supply chains in the Western Australian sheep meat industry. Although no specific projects are dealt with in detail, the document proposes opportunities which, subject to further investigation and analysis, may support decisions to invest in one or more links in the Western Australian sheep meat supply chain. The five potential investment opportunities outlined in this document include: 1. Direct investment in a sheep meat farm. 2. A larger scale investment involving an aggregation of several mixed grain and sheep meat farms. 3. Establishing a co-operative sheep meat venture utilising a parent farm for breeding, finishing and syndicating, with key sheep farmers to breed and raise lambs. 4. Establishing a sheep meat contract farming company to syndicate with local sheep farmers who would shepherd an investor’s sheep on their land. 5. Developing a specialist breeding farm operation to produce and export elite breeding animals for use in overseas sheep meat breeding programs. The scope of this document does not include opportunities which may exist to invest or have other commercial arrangements beyond the farm gate, however there are several options available including: • contract processing of livestock and export of carcases or meat • purchase or co-investment in an abattoir or boning room • contracting the export of live sheep or • co-investment in the logistics for live sheep export. DAFWA is able to facilitate discussions with WA industry if an investor has an interest in the development of an integrated supply chain in WA. Earnings before interest and tax (EBIT) from Western Australian best practice mixed farm growing grain and sheep are typically in the range of 11–14%, including the capital gain on farmland in ‘real’ terms. The real capital gain on farmland over a 40 year period when adjusted for inflation is 3.15% per annum (nominal 9.19%). It could be anticipated that projections for opportunities 1 and 2 above could be within the EBIT range above. Opportunities 3, 4 and 5 are currently at the concept stage and require further work to develop, including scope and costs. Following development of concept papers, a stage gate approach including pre-feasibility study and definitive feasibility study will need to be undertaken prior to execution and operational phases commencing.

Executive summary • The WA sheep meat industry is seeking investment to increase sheep production in order to meet the growing international demand for sheep meat. A flock of 20 million sheep (current flock size is 15 million) will enable the production of an additional 2 million live animals and 0.5 million tonne (t) of sheep meat for export per year. A number of co-investing opportunities exist for investors who have a long term (10 years+) plan to export sheep meat and live sheep to Asian and Middle Eastern markets. A long established and well-developed supply chain exists to support any production initiative. • WA produces 5% of the world’s sheep meat exports and 21% of the world’s live sheep exports. It is an export-focussed industry based in a safe and reliable country that is welcoming of Australian and overseas investors in agricultural projects. • The investment opportunities presented in this document focus on the sheep meat grower (farmer). Five opportunities are detailed; some are simple and currently exist in the market place, others are innovative and require further research and analysis before a decision to invest can be supported. The Elite Sheep Breeding Project will have a special niche role for current sheep owners who are seeking complementary investment opportunities to enhance their business (see section e, page 17). A number of elite breeding animals are currently being air freighted to China. • The financial analysis illustrates the profitability of sheep meat enterprises. Benchmark data from industry sources indicates that a sheep flock managed using best practices should produce a profit exceeding A$100/ha (Farmanco Profit series). The financial returns (EBIT) achieved by best practice agricultural businesses in the grain-sheep zone is 11–14% on a five year average. • This document aims to provide an overview of the sheep meat sector and identify what potential exists for co-investing to enhance production for either the processed product or live animal market. Why invest in sheep meat production in Western Australia? WA is an excellent location for a sheep meat production enterprise because: • WA has a proven track record of profitable production, with a flock of around 15 million sheep. • Previously when the world wool price supported greater production the state had an industry far greater in size, with the flock peaking at 38 million in 1991. • The industry’s infrastructure and skills were originally developed to support a much larger sized industry; providing advantages to the industry in its current form. • WA is the world’s largest exporter of live animals. Nearly 2 million sheep are exported each year (around 70% of the Australian total), valued at A$166 million (m) in 2012–13. • Exports of sheep meat in 2012–13 were valued at A$203m. • All the necessary infrastructure and procedures are in place to service the meat and live animal trade – purpose-built ships, modern ports, international airport, export-accredited abattoirs, excellent road transport services and sheep handling facilities.

Investment opportunities in Western Australia’s sheep meat industry  |  5

• The Western Australian flock is free of most livestock pests and diseases that can cause major production and market losses. • WA is located close to markets for live sheep in the Middle East and Asia, resulting in 3–4 days less shipping time and reduced transport costs compared to other ports in Australia. • Industry adopts ethical and sustainable production practices and complies with standards set for animal welfare and supply chain integrity. • WA has a reliable climate for sheep production and abundant land at competitive prices. • WA has a safe, stable political and business environment; the government encourages business investment and enterprise innovation.

Industry overview The Western Australian sheep flock The current sheep flock in WA is estimated at 15 million sheep. There is a need to grow the flock to 17 million (initially) and ultimately 20 million sheep, in order to meet growing demand. Figure 1 (next page) illustrates the area of WA referred to as the grain belt. This area has annual rainfall of 300–700mm. Over 13.3 million sheep (more than 92% of the flock) are run in the grain belt region of the south-west agricultural land area. From a logistics viewpoint this places the majority of sheep within close proximity to the facilities needed to export to overseas customers. The WA flock includes 8.1 million ewes (female sheep), which are essential for the sheep meat industries’ future success. The Merino ewe, which is a wool breed that also produces meat, makes up 7.1 million (88.2%) of the total number of ewes. The remaining 1 million ewes consist of Merino sheep meat crosses, dual purpose and specialist meat non wool breeds. All are suitable for sheep meat production.

MULLEWA

P

A

Geraldton

Legend Port Abattoir Saleyard Rainfall isohyets Agricultural area boundary Sheep numbers 2011 (1 dot = 10 000) Grain belt

COOROW

WONGAN HILLS

A

MERREDIN

S

Perth

NORTHAM

QUAIRADING

P

P A S

Narrogin 300 mm

Katanning A

Bunbury

NARROGIN NEWDEGATE

A

GRASS PATCH

A

GIBSON

A S

Esperance

500 mm

A

700 mm

A

Albany

0

40 80 120 160 200

Kilometres Figure 1 Grain belt, geographical distribution of sheep, abattoirs, saleyards and rainfall isohyets for agricultural area of Western Australia Each year about 4.8 million (60%) of the 8 million ewes are mated to Merino rams and 2.1 million (26%) to meat producing rams. The 4 million Merino lambs born each year are also utilised in both the live sheep and meat markets. There are around 6000 sheep farm businesses in WA with an average flock size of 2300 sheep. The largest 20% (around 1000) of sheep operations manage 4.1 million ewes with an average ewe flock size of 4000. Most sheep flocks co-exist on mixed farming enterprises (grain and sheep) which provide the opportunity to rotate areas farmed between grain and sheep over a number of years and graze crop residues after harvest. The sheep enterprise would utilise around 30–40% of the farm area.

Investment opportunities in Western Australia’s sheep meat industry  |  7

Climate The majority of sheep are run in the southern half of the state, which has a Mediterranean climate. This is also where most of the grain growing occurs; hence many businesses operate a sheep enterprise in conjunction with grain production. The annual rainfall in regions where the majority of sheep are run ranges from 300mm to 700mm, with the lower rainfall occurring in the eastern and northern regions. The majority of the rain falls between the months of May and October, which are also the cooler months of the year. On-farm sheep production The Western Australian sheep flock consists of a number of breeds and production systems giving sheep producers’ capacity to produce quality carcasses that meet the requirements of many markets. Most sheep producers run a sheep enterprise in conjunction with other farm enterprises; especially grain production. Feeding systems are generally based on annual pasture species, which provide green feed for the months of May to October. Outside the normal pasture growth period, livestock graze dry mature pasture and crop residues supplemented with cereal (oats and barley) and legume (lupins) grains to match the requirements of the livestock. New farming systems based on perennial pastures provide the opportunity to supply green feed outside the normal annual pasture growth period. In some cases livestock are not able to reach their target processing weights and farmers find it more efficient to sell these animals to other producers who may have a cheaper source of feed available. From a supply chain perspective, it is important to be able to produce a uniform supply of livestock throughout the year to meet customers’ requirements and enable abattoirs to operate at maximum efficiency for the whole year. This requires special management skills to grow and finish lambs to market weights. Lamb producers have developed skills in finishing lamb on crop residues and in feedlot systems. Processing facilities Sheep are processed in 11 main abattoirs distributed through the sheep producing areas of WA. Eight of these facilities are licensed to export meat to various world markets (including Halal certification, see Figure 1 opposite) while three abattoirs can process only for the Australian market. There are a number of facilities able to process goats and cattle as well as sheep. The size and capability of these facilities vary. The larger abattoirs can produce specialised frozen or chilled cuts, while smaller abattoirs tend to produce frozen and chilled carcass meat. Offal and skins are also produced as a by-product and are sold into a number of export markets. Generally farmers aim to produce an animal suitable for slaughter, they then sell to processors who on-sell to local and international customers/consumers. Two major selling facilities have been established at Katanning and Muchea where over 1 million sheep are traded annually through an auction system (see Figure 1, opposite). Farmers are able to sell sheep direct to processors, where producers are paid on the basis of weight and quality of the animal supplied for processing. An advantage of this system is producers receive some feedback on the quality of livestock produced for sale, which can assist with the management of livestock on farm.

Transport The sheep flock of WA is distributed over a wide geographic area, so distances travelled to move animals can be long. For example, Perth to Katanning is 300 kilometres (km) and Perth to Geraldton is 425km. Transport takes place via well-developed road systems, on fleets of modern trucks with purpose built livestock trailers. It is also governed by approved welfare systems to ensure livestock arrive at destination in peak condition. Export facilities Agriculture in WA has developed many export markets and has suitable sea and airfreight facilities, including capacity to export frozen and chilled product as well as live animals via sea or air. All airfreight leaves from Perth International Airport and Fremantle is the major port for sea freight (see Figure 1). Occasionally, sheep and lamb are exported through the port of Geraldton.

Market analysis Sheep meat export industry Industry situation The sheep meat industry in WA comprises around 18% of Australia’s sheep meat exports (and 5% of the world’s). WA sheep meat export volumes in 2012–13 reached 63 000t (Australian Bureau of Statistics, 2013) and our projections to 2017 indicate continued growth, being advantaged from a rebuilding sheep flock (Meat and Livestock Australia, 2012). Taking into account a medium growth prospect at a rate of A$5000*/t (Australian Bureau of Statistics, 2011) sheep meat export price, our projection shows the total earnings of the sheep meat industry in 2017 could exceed A$250m (Nath, 2012). [*A$5000/t was the average export price in 2011 and the estimation of the sheep meat industry value of A$250m by 2017 is based on this price. This price is used only to understand the growth prospects of the industry assuming export prices will remain unchanged. If price changes the industry value will change accordingly.] Size of the market WA’s average annual sheep meat export is around 50 000t which declined before rebounding in 2012–13 to 53 000t (Figure 2). Our estimated export growth projection is for WA to increase exports by 28% on its 2011 level in response to a projected 1.1 million tonne world sheep meat demand by 2017 (Nath, 2012).

Investment opportunities in Western Australia’s sheep meat industry  |  9

World vs WA sheep meat exports 1.2 1.0 0.8 0.6 0.4

2017

2016

2015

2014

2013

2012

2011

2010

2009

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2007

2006

0.0

2005

0.2

Year WA

WA prediction

World

World projection

World projection trend Figure 2 Comparison of world exports and WA’s sheep meat exports (Source: FAO Stat, 2012 & ABS, 2012) WA’s major sheep meat export markets include China, United Arab Emirates (UAE), USA, Saudi Arabia and Jordan (Figure 3). These markets import around 50% of WA’s total sheep meat exports. As WA’s current share of world export trade in sheep meat is around 10%, there is a huge market opportunity to build export volume of sheep meat.

Sheep meat export destinations China 18%

53 others 44%

United Arab Emirates 11%

Jordan 9%

Saudi Arabia 9%

USA 9%

Figure 3 Destination of Western Australia’s 53 000 tonne sheep meat exports 2012–13 Live sheep export industry Industry situation WA contributes around 75% of Australia’s export of live sheep (and 21% of the world’s). Over the last five years an average 2.23 million live sheep were exported from WA. Our projection to 2017 shows live sheep exports are expected to grow by 19% on the 2011 level (1.7 million) to 2.03 million as a result of rebuilding of the Western Australian sheep flock (Meat and Livestock Australia, 2012). This industry generates export income ranging from A$175m to A$275m annually depending on export price and sheep numbers. Taking into account a medium growth prospect at a rate of A$129*/head (Australian Bureau of Statistics, 2011) live export price, our projection shows the total earning of live sheep export industry in 2017 could be A$261m (Nath, 2012). [*A$129/head live was the average export price (free on board) in 2011 and the estimation of the live sheep industry value of A$261m by 2017 is based on this price. This price is used only to understand the growth prospects of the industry assuming export prices will remain unchanged. If price changes the industry value will change accordingly.] Size of the market WA’s average annual export of live sheep for slaughter (Figure 4) is around 2 million live sheep. Our projected export growth would increase WA’s global market share in the forthcoming years.

Investment opportunities in Western Australia’s sheep meat industry  |  11

World vs WA live sheep exports Projection WA World

12

9

6

2017

2016

2015

2014

2013

2012

2011

2010

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2008

0

2007

3

2006

Sheep numbers (million)

15

Figure 4 Comparison of world export and WA’s supply (Source: FAOStat, 2012 & ABS, 2012) WA’s live sheep export markets are mainly focused in the Middle East countries. Kuwait, Qatar, Jordan and Turkey are the major markets accounting for around 87% of WA’s total export (Figure 5, next page). Countries that constitute WA’s export markets, imported 7.5 million live sheep from the global markets in 2010 (Food and Agriculture Organisation, 2012). WA’s total export share in these countries was 29% indicating that there could be other market opportunities available.

Live exports destinations

Israel 4%

six others 9%

Turkey 7%

Kuwait 36%

Jordan 16%

Qatar 28% Figure 5 Destination of Western Australia’s 1.7 million live sheep exports 2012–13

Details of potential investment opportunities Sheep meat agribusiness supply chain Sophisticated and developed supply chains exist for the sheep meat industry (Figure 6 , opposite). The sheep meat farmer is key to the throughput and capacity of the pathway. This group represents 6000 business entities and 15 million sheep. Future expansion of the sheep flock by this group could see an extra 4 million sheep available for export. Increasing the supply of sheep for export is where the best investment opportunities exist at this time. Over the last 10 years an average 4.2 million sheep per annum have been processed for the sheep meat markets, providing 0.5 million tonnes of sheep meat for local and overseas consumption. In the last 5 years on average 2.23 million live sheep per year were exported from WA to mainly Middle Eastern destinations.

Investment opportunities in Western Australia’s sheep meat industry  |  13

Input suppliers

Sheep meat grower

Sheep logistics

Marketing agent

Live sheep

Breeding sheep

Meat sheep

Meat sheep

Live sheep logistics

Transport (boat, aeroplane)

Processors

Sheep carcass

Accumulation (feedlotting)

Meat portions

Meat logistics (chilled & frozen)

Shipping & airfreight Figure 6 The sheep meat agribusiness supply chain It is estimated that the capacity of the existing processors is approximately 6.4 million sheep and the boat capacity for live sheep is approximately 4.5 million (see Figures 7.1 and 7.2, next page). These individual supply chains are operating under capacity by around 2 million sheep each, indicating an opportunity to expand by up to 4 million additional sheep (to be either processed or shipped live from WA). Vertical integration along the supply chain is limited at this point in time. However there are opportunities for investors in WA, including developing integrated supply chains which produce or purchase sheep, having joint investment in WA sheep processing facilities and exporting sheep meat to facilities overseas for distribution or further processing.

Sheep exported live from WA 3.1

3.0 2.2

2.3

2.0

1.8

1.7

2012−13

2.5

2011−12

Sheep numbers (millions)

3.5

1.5 1.0 0.5 2010−11

2009−10

2008−09

0.0

Financial year Figure 7.1 Number of sheep exported live from 2008–09 to 2012–13

7

Lambs

6

Estimated capacity 6.4m

5

Sheep Capacity

4 3 2 1 2012−13

2011−12

2010−11

2009−10

0 2008−09

Sheep & lambs per year (millions)

Sheep and lambs processed in WA

Financial year Figure 7.2 Annual sheep and lamb slaughter from 2008–09 to 2012–13 for WA plus estimated capacity of existing processors

Investment opportunities in Western Australia’s sheep meat industry  |  15

Investment opportunities in sheep meat production It is clear that WA offers a strategic opportunity in sheep meat, has an established flock and a well-developed sheep meat supply chain. The focus of these opportunities is to invest directly into sheep production with the aim of enhancing the supply of sheep for meat and live export. These opportunities are seen as medium to long term (8–15 years) and specifically target future food supply to overseas markets. a. Direct investment in a mixed grain and sheep meat farm This opportunity would enable an investor to establish themselves in the sheep meat industry in WA. It is a simple and low management investment. The aim would be to buy a farming enterprise that produces sheep meat (10 000 head) and grain products. Most farms produce both sheep meat and grain, with the ratio between each determined by management. It is possible to lease additional farmland to increase the scale of the single unit farm. The capital required to undertake the project would be A$15–$20m. This would include acquiring the farmland, farming plant and machinery, sheep (10 000 ewes) and provide the annual working capital (A$1.5–$2m.) (PriceSevenson, 2013). If solely managing sheep is preferred, an opportunity exists to contract crop production using nearby farmers and their farming plant. Share farming is also an option. The managers of this farm would manage 10 000 ewes and 3000 hectares of crops. Based on information from various industry benchmark studies, a financial return of 5–10% per annum as an EBIT could be expected. The farm size would be 6000 arable hectares. b. Aggregation of several mixed grain and sheep meat farms The diverse geographic spread of the sheep flock in the agricultural areas of WA provides the opportunity to select a number of sheep meat farms and combine (aggregate) them into a single management unit. It would be possible to then combine a number of aggregated units throughout the South-West Agricultural Region to achieve further economies of scale. The main purpose of the aggregation is to provide scale to the farming operation and hence better utilise management, infrastructure and machinery. Specialist farm staff could also be employed. Investors and sovereign entities that have purchased grain-farming operations in WA have adopted this model, which gives the investment geographic spread and minimises risk due to seasonal variation in local rainfall. With a livestock enterprise it also reduces disease risk. An aggregation of 30 000 hectares would need an investment of A$85 –$95m. This project would comprise 50 000 ewes for breeding and they would annually produce 65 000 meat sheep for processing or live export. The investment would cover the purchase of farmland, farm plant and machinery, livestock (50 000 ewes) and working capital (PriceSevenson, 2013). If the properties selected are in higher rainfall zones (>450mm rainfall), the capital involved in the investment will increase. A higher rainfall zone will also allow more sheep and fewer crops to be managed; this would be a preferred option for a sheep meat enterprise. The managers of these farms would be managing 50 000 ewes and growing 15 000 hectares of crops. Based on information from various industry benchmark studies, best practice indicates EBIT of 11–14% per annum are possible.

c. Establishing a syndicated sheep meat venture (concept) The 6000 WA sheep farms are spread throughout the grain belt. An average flock is 2000 ewes but the largest 20% of farms have an average of 4000 ewes. An opportunity exists to work co-operatively with an investor to breed and raise lambs for future export as live animals or processed meat product. The proposed model would see the investor purchase and develop a parent sheep farm for the purpose of breeding rams and possibly ewe hoggets (young females). The investor would work co-operatively with WA sheep farmers to breed lambs which will be returned to the parent farm and be either lot fed and/or shed finished in preparation for export or slaughter. Ownership of the breeding stock in the project could be with the investor, who would provide the sheep farmer with ewes and rams to run on the farmer’s farm. Another option is for the farmer to own the ewes and the rams are provided from the investor’s parent farm ram breeding flock. To make the project successful a solid contract for the purchase of the lambs over a period of years would be essential. A price grid based on weight and quality would be required. If a target of 100 000 lambs were set, between 50 and 75 co-operators would be required to make the project feasible. A project that aimed to produce 100 000 lambs would require 2000 rams and 25 000 replacement ewe hoggets annually. An initial investment in the parent farm for this sized project would be A$95–$100m. Long term (10 years) leasing of farmland would also enable the investor to reduce the initial capital cost of the investment. Project lifecycle, concept, pre-feasibility, definitive feasibility studies would need to be undertaken prior to progressing to execution and operations. The minimum project scope and scale of such a project needs to be determined through a stage gate approach. d. Establishing a sheep meat contract farming company (concept) The concept of farmland ownership may appear expensive and daunting to some investors. A novel business concept is to establish a sheep meat contract farming company. Investors in grain farms will often contract crop or share farmland. The opportunity exists for an investor to lease a suitable farm as a company base and to contract local sheep farmers to breed lambs using ewes owned by the investor’s company. The leasing of farmland is not novel in WA and can be achieved at annual rates of 4–8% of capital value. The major asset of the investor will be the ewe and ram flock. The cost of a project raising 100 000 lambs would be A$25m–$30m. For a contract farm to be successful good administration and excellent management would be essential. The contract arrangements with 50 to 100 successful sheep farmers would be critical to the company’s success. As a novel business model this project would provide an investor with the opportunity to successfully accumulate a large and regular supply of sheep meat animals for export. The management and logistics attached to the project are critical to its success. A feasibility study to analyse the scope and scale of this investment opportunity would be essential. Please also note the comments in (option c) above.

Investment opportunities in Western Australia’s sheep meat industry  |  17

e. Developing a specialist sheep breeding farm (active concept) WA has a flock of 15 million sheep. Traditionally this flock has had a wool bias; however the use of superior meat genetics has enabled the emergence of specialist meat sheep and in particular animals which do not have wool. Because of the long history of breeding sheep, the science and technology is available to utilise artificial insemination and embryo transfer. The large sheep flock provides many potential surrogate Merino ewes to implant with superior embryos. An opportunity exists to develop a specialist sheep breeding farm to utilise the size and scale of the WA sheep flock and the advanced technology in sheep breeding. The progeny from the elite flock would be exported live to the investor’s home country and used to enhance the quality of flocks in that country. To make this opportunity feasible an aggregation of sheep farms similar to that described in option b (above) would enable the export of a large number of elite rams and ewe hoggets. Depending on grading policies of the investor a minimum of 25 000 animals would be anticipated to be available each year. As this opportunity is a niche project, a full feasibility study would be essential to provide the scope and cost. It is important to note that smaller scale projects similar to that proposed are already operating in WA. A number of elite breeding animals are currently being air freighted to China.

Financial analysis Actual performance The financial performance of the sheep meat flock is measured by both enterprise performance and net profit. The enterprise performance compares profits between sheep enterprises. Net profit per hectare is a true measure of how profitable the sheep flock is compared to other enterprises such as grains. Net profit has accounted for operating costs, business overheads, machinery and management costs. Benchmark data from industry sources indicates that the top 25% of farmers are generating over A$100 per hectare on a five year average. The top 20% of sheep farmers run over 4000 ewes and their farm sizes will be 8000–10 000 hectares. An investment of this scale will require about A$30m of capital for land, farm machinery, livestock and working capital. Many of the opportunities detailed in this business case involve the purchase of agricultural land. Capital gains will be one important financial assessment of the land. Based on long term data (>40 years) from Landgate (a government agency that measures the gains), land in the agricultural region has increased at a nominal rate of 9.19% per annum. When adjusted for inflation the real rate is 3.15% per annum. The financial returns (EBIT) achieved by best practice agricultural business in the grain-sheep zone that is considered in the business case are 11–14 %, including capital gain on farmland in ‘real’ terms.

Potential performance Potential performance considers the ability of the meat sheep flock to maximise its profitability using known technology and excellent management. A recent study undertaken by economists and technical staff from the Department of Agriculture and Food, Western Australia compared the relative profitability of six different sheep enterprises used to produce sheep meat for either processing or live export. Enterprise performance is measured by using a gross margin analysis technique which assesses the income less the direct costs required to generate that income. The margins indicate the potential of the sheep meat flock. Allowing for fixed overheads these gross margins suggest on average a net profit of over A$134 per hectare is feasible. This is over 30% better than current best practice.

Key risks and mitigating factors • Financial risks The information provided in this business case is based on a sound understanding of the WA sheep industry. Individual investment projects will require expert assessment to verify the financial costs and income projections. Many factors not presented in the information may influence the financial outcome in a negative manner. • Seasonal factors The sheep farming systems referred to in this document rely on natural rainfall throughout the growing season. If rainfall varies dramatically from the average, a range of factors may affect the performance of the sheep flock and its ultimate financial performance. These factors may have a positive or negative effect, however, good management skills and risk strategies will minimise the adverse effects and take advantage of any positives. • Live animal export The Australian Government supports the long term sustainability of the livestock export trade. Animal welfare is central to the government’s consideration of livestock export trade issues. Under existing regulatory arrangements, all livestock exported for processing are subject to the requirements of the Exporter Supply Chain Assurance System. • Due diligence The five projects presented in this business case are opportunities that will require varying degrees of due diligence to be viable options. Correct due diligence is essential to confirm that the project meets the investment targets set by the investor. • Management quality Many of the opportunities that are presented as potential investments will require a high standard of management. A good knowledge of the WA farming system and skills in networking and logistics will ensure the success of many of the projects outlined. The top 25% of sheep producers in WA come from both the high and low rainfall zone.

Investment opportunities in Western Australia’s sheep meat industry  |  19

Other important information It is extremely important that all applications for regulatory approvals are underpinned by a clear and concise intent to achieve full disclosure based on a properly developed project proposal. This is because regulators need full disclosure of all required information from a properly developed project for quick and efficient processing of an application. A comprehensive, integrated development application could be used to attain concurrent development approval from the Local Government, the Department of Environment Regulation, the Department of Transport and the Department of Water. This could result in the time required for a total approval process of three to six months. The Department of Agriculture and Food, Western Australia is skilled in assisting investors to seek approvals and will work closely with proponents for the inception of the project. The time period for all regulatory bodies to assess a proponent’s application commences from the point at which they receive all the information required to make a decision in an appropriate format. This time period should not be confused with the point at which the proponent makes first contact with the regulators. Proponents from overseas also need to comply with the requirements of the Australian Government’s Foreign Investment Review Board (firb.gov.au).

How to progress Interested parties can contact: Mr Kevin Chennell Executive Director, Livestock Industries Department of Agriculture and Food, Western Australia Phone: +61 (0)8 9368 3554 Email: [email protected] Services provided by the Department of Agriculture and Food, Western Australia to assist investors include: • Provide detailed information on opportunities. • Assist with pre-feasibility plans to assess opportunities. • Assist an investor to seek the government approvals required. • Supply contacts such as project managers, joint venture partners, financiers, immigration specialists, accountants etc. • Access to relevant research and development information. • Information and advice on Western Australian government natural resource management and biosecurity legislation and regulations, and the responsibilities and obligations. • Information on Australian government quarantine and export regulation requirements.

Department of Agriculture and Food, Western Australia 3 Baron-Hay Court, South Perth, Western Australia 6151 Telephone: +61 (0)8 9368 3333 Email: [email protected]

agric.wa.gov.au

Disclaimer This business case reviews investment opportunities in the sheep meat industry in Western Australia. The business case and any additional information or documents that the state of Western Australia through the Department of Agriculture and Food, Western Australia (DAFWA) may supply, are to be used only as preliminary and indicative information, to be considered and used by prospective investors in the Western Australian sheep meat industry in conjunction with other information and appropriate financial, legal, industry and other expert advice tailored to their individual circumstances and intentions. Prospective investors should conduct (or engage appropriate professional advisers to conduct) their own analysis and due diligence on any proposed investments, including the process for obtaining approvals. No part of this business case or any additional information or documents that DAFWA may supply constitutes or should be relied on as financial, investment, legal or other advice. The Chief Executive Officer of the Department of Agriculture and Food, Western Australia and the state of Western Australia accept no liability whatsoever by reason of negligence or otherwise arising from any use or release of material (which in this disclaimer includes this business case, any information in it or other part of it, and any other information, advice or material, oral or written, DAFWA may supply in relation to any aspect of the Western Australian sheep meat industry, regulation of it or investment in it) or any error, inaccuracy or omission in the material. Although reasonable care is taken to make the material accurate, the Chief Executive Officer of the Department of Agriculture and Food and the state of Western Australia do not make any representations or warranties about its accuracy, reliability, completeness or suitability for any particular purpose. Copyright © Western Australian Agriculture Authority 2014.   ABN: 86 611 226 341