Cotton and grain high on the KAI radar

30 Aug, 2016 02:00 AM
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THE Kimberley Agricultural Investment company plans to move into cotton and grain, as further scale proves difficult to acquire and sorghum prices remain flat.

After purchasing Consolidated Pastoral Company's Carlton Hill station in the Ord River district this month, the Chinese company, which trades in Australia as KAI, will add scale to its already existing Ord development.

KAI general manager Jim Engelke said about half of the 15,000 hectare parcel of freehold land was suitable for farming.

Mr Engelke said while the plan was to acquire greater scale to justify the establishment of booming sugar industry in the Kimberley, using sorghum, diversifying into other markets looks to be a greater option.

He said the Carlton Hill parcel would give KAI enough scale to diversify its farming program, as the possibility of developing the third stage of the Ord River Project at Spirit Hills, in the Northern Territory looked unlikely at this stage.

"It certainly opens up the possibility of processing and value-adding industries," he said.

"We are looking at cotton or a bigger grains industry.

"The area is well-suited for cotton."

Prices sit at about $200/tonnes for Sorghum 1, but after a spectacular three year run, boosted by unprecedented Chinese demand, cotton prices have lifted.

Cotton prices have ranged from $300 to $600/bale, according to the Australian Grown Cotton Sustainability Report 2014.

The all-time high was $758/bale in 1995 while the all-time low was $233/bale in 1986.

Prices were also very high in 2011 due to a short-term shortage of cotton in exportable locations, reaching an average price of $664/bale.

The average price for 2009-2014 has been $396/bale.

Between 2011 and 2014, prices have hovered about $440/bale.

Australian cotton is in high demand internationally, according to ABARES 2014, China, Indonesia, Thailand, Korea, Bangladesh, Vietnam and Pakistan were the main markets for Australian cotton in 2013, with Australia being the third largest producer of cotton.

While KAI plans to enter the market, it also will use the cotton seed and fodder for cattle feed.

While a parcel of the land will be developed for KAI, the 476,000ha Carlton Hill station would continue beef production through a 10-year leaseback of the vast majority of the property.

Carlton Hill grows about 20,000 steers and heifers a year for export to Asia.

Mr Engelke said KAI was investigating whether its plans for storing and processing grains in Kununurra were viable.

The sugar mill, which contributed just below one per cent of Australia's raw sugar production, closed in 2007 after 12 years of operation, .

KAI general manager Jim Engelke said it still had a lot of work to do on the mill.

KAI won the right in 2012 to develop 14,000ha of irrigated cropping land in the Ord irrigation scheme stage 2.

The company committed to develop 7400ha of the Goomig (Weaber Plain) farm area with an option to develop a further 6000ha at Knox Plain.

After a less than average wet season, KAI worked through its normal off-season to prepare land for chia, quinoa and maize.

It farmed about 600ha at Stage 2 in 2015 and is farming 1700ha in 2016 – more than doubling the size of its available land.

KAI expects to be farming 4000ha in 2017, with the balance of the Goomig area ready for cropping in 2018, a total of about 6700ha.

In a deal with Cambridge Gulf, that settled in 2014, KAI bought into an unused mill almost 20 kilometres north of Kununurra.

The company intended to process sweet sorghum through the old sugar mill with the resulting syrup made into Baijiu, a white spirit consumed in Asia.

A shift to grain production, which could see processing, handling and storing of grain at the site, is being investigated.

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