Chinese-backed company stakes claim in WA livestock

The WA-based Harmony Agriculture and Food Co officially started trading last year and recently sent off its first shipment of livestock – 12,500 sheep bound for Muscat, Oman – through its subsidiary company, Phoenix Exports.

The group’s livestock vessel, MV Yangtze Harmony embarked on its maiden voyage from Fremantle and was loaded at 70 per cent capacity, to trial the vessel.

Within 18 months of establishing the company and investing $50 million in Australian assets, the company said it was setting the foundations to grow within the agricultural sector.

Harmony Agriculture and Food Co executive director general manager Australia Steve Meerwald said its vision is to build end-to-end transparency within the company’s supply chain.

“It is a customer focused, food and production business,” Mr Meerwald said.

“Our business model is about creating a genuine harmony along the supply chain – it’s not just a feel good name.

“Our vision is to build supply chains, that are transparent and efficient.

“In production, processing and in the distribution of foods.”

Even though the company is backed by the Chinese, Mr Meerwald said, its focus was not just on the Chinese market.

“Whether it’s South East Asia, the domestic or any other market, in beef, sheep, lamb or wool or whatever it may be, we want to look at how we could bring the components of the supply chain together to create transparency,” he said.

Mr Meerwald said feedback along the supply chain, including to producers, was key to establishing knowledge of what the consumers want.

“In agriculture there are too many barriers within the supply chain,” he said.

“The linkages are not transparent, due to vested interests and lack of systems, the process is inefficient to the disadvantage of everyone else.”

In mid-2016 chairman, Mr Wenfeng Wong, executive director Mr Yuan Yixiang, executive director Mr Yanlai Sun, non-executive director Mr Meerwald and executive director Richard Pearce formed the company and started to establish the Harmony group of agricultural businesses.

Working within the maritime and consulting business in China, Mr Sun has had a history of championing innovative and new projects.

He was interested in converting vessels into livestock export vessels in his hometown of Dalian in northern China.

“After initial meetings with Mr Sun and his group he commissioned one of our companies, Indago Solutions, to provide consulting over the type, size and construction of the livestock fittings and services for the conversion,” Mr Meerwald said.

“Through that process, Richard, and myself had been working with another group, HopShun Australia to establish a more meaningful and efficient method for international investors to partner up with Australian businesses and potentially farmers to facilitate investment in Australian agriculture.

“And that’s not just in beef and cattle, but in all areas where investors are keen to participate in the opportunity that Australian agriculture presents.

“Collectively we all thought it was a sound project and decided to participate in helping investment move forward.

“We combined HopShun and our existing Australian businesses to form Harmony Agriculture and Food Co in early 2016.”

Two former container vessels, MV Yangtze Harmony and MV Yangtze Fortune, were purchased and converted, representing a total investment of about US$50 million to operate from Australia, New Zealand and the US to export to all markets.

The MV Yangtze Harmony set off for the Middle East for its first commercial voyage from Fremantle, while MV Yangtze Fortune is near completion and will undertake her maiden voyage this year.

Since being established in early 2016, the company has purchased three properties in Australia, including the Westbeef feedlot, Kalannie and Rancho East, Esperance and Mt Fyans, Victoria.

The Mt Fyans property was the company’s most recent purchase.

Located at Dundonnell, in the Victorian western district, the Mt Fyans aggregation covers 5900 hectares of contiguous land.

The Westbeef feedlot has a licensed capacity of 7500 head of cattle.

All up the company now runs 15,000 breeding and grazing cattle and 6500 sheep across Victoria and WA.

Mr Meerwald said the company would look to sell the breeder herd as the business model was focused on grazing and feeding, not breeding.

“Our model is to acquire stock to maximise the genetic potential and the value of every animal, to be able to meet consumer demand wherever that may be,” Mr Meerwald said.

“We will then analyse and review the performance data and our own efficiency in a process of continuous improvement.

“We will then share the information with everyone involved and get their input to maximise their own efficiencies or to deliver better quality or pricing.”

The company is looking at a number of smaller acquisitions within Australia that will complement their existing business, however Harmony said it had no interest in entering the processing sector.

Mr Meerwald said it would use or supply third-party processors in Victoria and WA and would charter to other exporters or use its own vessels.

“We are not processors and we don’t aspire to be,” he said.

“Perhaps down the track, but at this stage there is a lot of work to consolidate the business we already have going.

“We have been supplying a number of processors and exported livestock ourselves through Phoenix Exports and Breedex Australia.

“We think creating transparency will help the industry to work together and will focus on creating maximum value and deliver a product that our customer wants.”

Harmony Agriculture and Food Co group general manager of strategy and development and executive director Mr Pearce said through his experience in the export and agricultural sectors, it was clear there were opportunities.

He said while Australia presented a wealth of opportunities, business in the sector lacked scale and investors were unsure of how to invest into Australian agriculture and the opportunities and money were unable to marry up.

He said many investors looked at Australian investments in terms of mining, oil and gas opportunities, but agriculture has a different profile.

“I felt there was and still is a lot of opportunity in the sector,” Mr Pearce said.

“There is a lack of understanding within the investment sector on what the structure and returns looked like within agriculture.

“There are a few targets and lack of businesses with scale to invest into.”

Mr Pearce said as he analysed it, it was clear a business model could be established.

“So that investors could more readily understand the opportunity and make that decision to invest with a clear understanding of the business, the opportunity and the risk,” Mr Pearce said.

“And that’s what we set out to do.”

Mr Pearce said the company’s vision is to build something that works for the investors, the operators and for the communities it works in.

“We have stuck with what we know,” Mr Meerwald.

“The group that we are working with in China, have a broader view of opportunities in the food sector, one which we share.

“We have already had a busy 18 months, with the establishment of the business, the acquisition of the properties and the production enterprise. We will now consolidate that and look at other opportunities as we build our systems.”

The new company has now absorbed a number of subsidiary companies, including: Harmony Operations Australia, Phoenix Exports, BreedEx Australia, Indago Solutions, Taurindi Beef, Sequoia Agriventures and Harmony Marine, which between them run and operate the properties, livestock, administration and charter the vessels for commercial live exports.