1. Precision Beef
IndOz Northern Australia Cattle Supply Chain
Concept Paper
Dr Shane Blakeley
Precision Beef
+61 458 651 659
shane@rpsys.com.au
July, 2013
2. Background
Darwin/General Santos
1,200 nm (2,400 km)
Darwin/Jakarta
1,400 nm (2,800 km)
Darwin/Toowoomba
3,300 km
• Indonesia has been a long-term market
for Australian cattle, importing up to
600,000 head per year.
• This demand has been met mainly by
Australian cattle stations in the NT and
Kimberley where there are
approximately 2,000,000 cattle
producing 500,000 young cattle/year.
• The climate and pastures in the region
make it uneconomic to grow these cattle
out to slaughter weights. Their best use
is as feeder cattle, going in to feedlots.
• The traditional feedlot areas are in
south-east Queensland, 3,000 km away.
• It is closer to send the cattle to Indonesia
and the Philippines to be fed on low-cost
by-product feedstuffs.
3. Current situation
• In recent years, the Indonesian
government has limited their cattle
intake to about 250,000 head per year
with an upper weight limit of 350 kg/hd.
• This has lead to beef shortages in
Indonesia and a sharp increase in the
cost of beef to consumers.
• This quota was intended to increase
domestic production and supply but
there is evidence that it has been
counter-productive, leading local
farmers to slaughter their breeding stock
in response to the high prices on offer.
• The Indonesian and Australian
governments are now encouraging
Indonesian companies to invest in the
northern Australian cattle industry to
provide a more stable supply base for
Indonesia.
4. Investment concept
• In response to this situation, Precision Beef has formulated a concept to underpin the
supply and fattening of 90,000 head of cattle per year;
Australian
cattle supply
Live export
Indonesian
fattening & slaughter
- with about one third bred on the
project’s own stations,
- one third sourced externally but
grown out on the project’s
backgrounding station(s), and
- one third sourced externally at the
time of export.
90,000 head of cattle, fattened in
Indonesia, would produce over 20,000
tonnes of beef,
enough for 10 million people, based on 2
kg per capita annual beef consumption.
5. Product flows
Breeding stations
Breeding cows 66,000 head
Weaning rate 68%
Calves weaned 45,000 hd/yr
Replacement heifers 13,000 hd/yr
Export weaners 32,000 hd/yr
Backgrounding
Home bred 32,000 hd/yr
Externally sourced 28,000 hd/yr
Total 60,000 hd/yr
Entry weight 180 kg
Weight gain 130 kg/yr
Export weight 310 kg
Live export
Home grown 60,000 hd/yr
Externally sourced 30,000 hd/yr
Total 90,000 hd/yr
Fattening
Imported cattle 90,000 hd/yr
Entry weight 310 kg
Average daily gain 1.5 kg/day
Time on feed 80 days
Liveweight gain 120 kg
Exit weight 430 kg
Carcass weight 237 kg
Beef supplied 21,285 tonnes
External
suppliers
7. Cattle supply: Breeding
Preparation
Voyage
Feedlot
Slaughter
Breeding
Backgrounding
Accumulation
• It is proposed that an Indonesian entity purchase a number of breeding stations in
northern Australia.
• Precision Beef has identified a number of suitable properties (available as of July, 2013).
Cattle numbers
Property Area Breeders Total
VRD 1 550,000ha 20,000 42,000
VRD 2 550,000ha 18,000 41,000
Kimberley 1 950,000ha 15,000 35,000
Central Australia 1 650,000ha 6,000 10,000
Central Australia 2 900,000ha 7,000 12,000
Total 3,600,000ha 66,000 140,000
• Assuming a weaning rate of between 65% and 70%, this aggregation will produce about
45,000 calves per year.
• About 13,000 heifers are needed each year to replace breeding cows that have reached the
end of their productive life.
• That leaves about 32,000 head produced each year to enter the export stream.
9. Cattle supply: Backgrounding
• For the most part, calves produced by the
breeding stations will be grown out on
site for one year.
• At the end or that growing period, they
will weigh between 300 kg and 350 kg,
suitable for export.
• It is also proposed that the project
purchase one or two additional
properties, dedicated to backgrounding
(growing out) young weaners, capable of
running about 30,000 head, in total.
• These sites would complement the
breeding stations in drought years when
there might not be enough grass to
provide feed for the weaners or to
background stock purchased from third-
party suppliers, growing them out to
export weights.
Preparation
Voyage
Feedlot
Slaughter
Breeding
Backgrounding
Accumulation
10. Live export: Accumulation and preparation
• Each consignment will comprise around 2,500 head, given the size of the available
vessels.
• Assuming a voyage cycle time of 10 days, one vessel could manage the freight task for
the projected 90,000 head intake.
• About two thirds of the cattle to be exported will be sourced from the project’s breeding
and backgrounding properties. One third will be sourced direct from third party
suppliers.
• It is essential that selected animals, facilities and handling procedures comply with the
Australian government’s welfare standards (ASEL).
• Livestock need to be assembled in an Australian government registered facility, prior to
export. Best practice dictates three days in the facility to ensure the animals are
conditioned to the fodder for the voyage.
• The cattle are treated for parasites while in the facility, as per the health conditions
stipulated by the Indonesian government.
• Prior to loading, they are thoroughly inspected by an AQIS accredited veterinarian to
ensure their health and welfare on the voyage.
Preparation
Voyage
Feedlot
Slaughter
Breeding
Backgrounding
Accumulation
11. Cattle supply infrastructure
• Cedar Park, Wyndham and Karumba
assembly premises
• Third party transport operators
• Darwin, Wyndham and Karumba ports
• Third party shipping provider
Preparation
Voyage
Feedlot
Slaughter
Breeding
Backgrounding
Accumulation
12. Live export geography
VRDKimberly
Top End
Barkly
Tableland
Gulf
Country
Karumba
Wyndham
Darwin
Cedar Park
Preparation
Voyage
Feedlot
Slaughter
Breeding
Backgrounding
Accumulation
13. Live export: Voyage
• The loading process and all facets of the voyage (stocking density, feed and water, health
and welfare, etc) are strictly regulated under the Australian government’s Australian
Standards for the Export of Livestock (ASEL).
• Darwin and Wyndham are the preferred export ports, being only 1,400 nautical miles
from Tanjung Priok, but the project may also draw cattle from Karumba or Port Headland
as the opportunity arises.
• The voyage from Darwin to Indonesia takes about four days.
• The most efficient vessel configuration is one of about 3,000 m2 of pen space, sufficient
for approximately 2,500 head of cattle.
• An accredited stockman accompanies each consignment, overseeing a crew of five to
eight trained stock attendants.
• The cattle are fed and watered on a regular schedule and inspected daily for health issues.
Problem animals are isolated and treated. Losses during the voyage are minimal.
• A report must be furnished to the Australian government at the end of each voyage,
detailing any animal welfare issues during the voyage and during discharge.
Preparation
Voyage
Feedlot
Slaughter
Breeding
Backgrounding
Accumulation
14. Fattening and slaughter
• The fattening phase in Indonesia is the most profitable component of the supply chain.
• Precision Beef recommends the project develop two feedlots in Indonesia, each of 15,000
head capacity, sufficient for a combined annual throughput of 90,000 head.
• Cattle will enter the feedlot at an average weight of, say 310 kg (280 to 350kg range).
They will be feed for about 80 days with a target average daily gain of 1.5 kg/head/day to
close out at 430 kg.
• The ration comprises green-chop corn, molasses, copra, cassava, rice bran and a
mineral/vitamin mix.
• All cattle that leave Australia must be accounted for on close-out under the Australian
government’s Export Supply Chain Assurance Scheme (ESCAS). This is done using
individual animal RFID tags, linked to the Australian NLIS database.
• Precision Beef can supply an expert management team, fully conversant with feeding,
animal husbandry, animal health and records management, to oversee the facility’s
operation.
• The cattle must be slaughtered at a facility that meets the standards required by the
Australian government.
• As with the feedlot, all animals entering the slaughterhouse must be accounted for within
the ESCAS system with that reconciliation made available to the Australian Government
for auditing animal welfare conditions.
Preparation
Voyage
Feedlot
Slaughter
Breeding
Backgrounding
Accumulation
16. Regulatory issues
ASEL The preparation and export of live cattle is regulated by the Australian
government under the Australian Standards for the Export of Livestock.
These standards must be adhered to and compliance documented
throughout the export process.
ESCAS The Export Supply Chain Assurance System imposes responsibility on the
exporter to ensure the post-discharge welfare of all animals exported.
This covers the treatment and management while in the feedlot and at
slaughter. Compliance must be documented and is audited annually.
FIRB The Australian government welcomes foreign investment but land
purchases by private investors must be approved by the Foreign
Investment Review Board if greater then $242 million. All land
purchases by state owned enterprises and sovereign wealth funds are
subject to FIRB approval, regardless of size.
Indonesia Cattle can only be imported to Indonesia under permits issued by the
Indonesian Agriculture Department. Imports in 2013 are likely to be
limited to less than 300,000 head. There is some thought that cattle
sourced from Indonesian owned farms might not be subject to import
permits.
17. SWOT analysis
Strengths Weaknesses
• Experienced management team
• Depth of internal and external expertise
• Quality country and infrastructure
• Scale and low cost operations
• Geographic diversity
• Low cost feedstuffs in Indonesia
• Secure, established markets
• National and local government support
• Reproductive performance in
northern Australia is generally
lower than eastern and southern
states
• Inwards and outwards freight costs
• Indonesian quotas and weight
limits
• Limited alternative markets
• Need to comply with Australian
government regulatory impost
Opportunities Threats
• Develop a breeding capacity in Indonesia
with heifers sourced from Australian
operations
• Export over-weight cattle (>350 kg) to
Precision Beef’s Philippine feedlot
• Horizontal integration, eg shipping, ship-
board feed production, etc
• Expansion
• Cattle supply and price
• AUD/IDR exchange rate
• Change in Australian government
regulations
• Change in Indonesian government
regulations
• Biosecurity
• Drought
18. Management profiles
Name Position Background
Dr Shane
Blakeley
General
manager
Shane is is a veterinarian with thirty years experience in
managing farming operations in Australia and south-east
Asia. He has also provided consulting services to an
extensive range of clients including Meat and Livestock
Australia and Ray White Rural.
Tony Struss Supply
coordinator
Tony owns and operates the northern Queensland private
livestock agency business, Australian Livestock. He has
almost forty years experience in sourcing cattle for live
export and for domestic feedlots and abattoirs. He also
has extensive experience as a livestock exporter.
Arnel Corpuz Operations
manager
Arnel started work at the Polomolok Feedlot in 1998,
rising to the position of manager in 2001. He ran a large
feedlot in Queensland from 2007 to 2012 and recently
returned to the Philippines to further his business career
there.
Rammie
Ylagan
Feedlot
supervisor
Rammie also has a long history with the Polomolok
Feedlot, as well as working in feedlot operations in
Australia.
19. Available contractors and advisors
Name Expertise Background
Australian
Livestock
Livestock
procurement
Australian Livestock is an ideal partner to assist in the
sourcing of livestock. Their client base extends from the
Queensland coast through to the Kimberley in Western
Australia and they have close associations with other
agencies throughout northern Australia..
Cedar Park Export
preparation
Cedar Park handles about 40% of the cattle shipped out of
the Darwin Port. The proprietor, Nick Thorne, has had a
long association with Precision Beef.
Vincent Posada Nutrition
consultant
Masters degree in animal nutrition and range management
from Texas A&M. Client base of feedlots, dairies and
stock feed manufacturers in Australia, North and South
America and south-east Asia.
Quirindi
Feedlot
Services
Veterinary
consultant
Sophisticated beef cattle practice, specialising in
epidemiology, disease prevention and performance
analysis
20. Capital required
Australia
Breeder stations (including livestock, plant & equipment) $150,000,000
Backgrounding properties (including livestock, plant & equipment) $50,000,000
Working capital $10,000,000
Sub-total; Australia $210,000,000
Indonesia
Feedlots 2 x 15,000 hd @ $800 /hd $24,000,000
Feedlot inventory 25,000 hd @ $800 /hd $20,000,000
Working capital 25,000 hd @ $200 /hd $5,000,000
Sub-total; Indonesia $49,000,000
Consolidation
Australia $210,000,000
Indonesia $49,000,000
Establishment costs $10,000,000
Contingency $31,000,000
Total capital required $300,000,000
