Merino sheep on Merredin Farms, Western Australia.

BRAZILIAN meat packer Minerva Foods has signed an agreement with the Saudi Agricultural and Livestock Investment Company for the possible acquisition of Australian assets and establishment of a joint venture to process sheep meat and beef.

The non-binding memorandum of understanding for asset acquisition and the meat processing joint venture was signed as well as a contract for Minerva to supply potentially 25,000 tonnes of product annually at market prices to SALIC (UK) Limited.

SALIC Australia owns the Western Australian wool, sheep meat and cropping operation, Merredin Farms, which it bought from the Nicoletti family in 2019. The operation spans 211,000 hectares of freehold and leased land and runs about 40,000 Merino sheep.

In September last year, SALIC announced it had increased its shareholding in Minerva Foods from 25.5 percent to 33.83pc. SALIC was formed in 2012 to secure food supplies for Saudi Arabia. Minerva Foods and its subsidiaries operate slaughtering and deboning plants, processing units and distribution centres in Argentina, Chile, Colombia, Paraguay and Uruguay.

A statement on 11 February said that with SALIC’s support, the supply contract should strengthen Minerva Foods’ exposure and operations in the Middle East and Asia, which comprise around 65pc of the world’s population and 40pc of global gross domestic product.

“According to the USDA (United States Department of Agriculture), these markets accounted for over 60pc of global beef imports in 2020.

“In the three (3) first quarters of 2020, the region was the destination of around 55pc of Minerva Foods’ beef exports, which highlights its importance and potential to increase animal protein consumption and imports,” Minerva Foods said.

“Australia is the world’s leading exporter of sheep meat processed products and the second largest exporter of beef; it is recognized worldwide for the tradition and quality of its products, accessing both high-growth markets, such as Asia and the Middle East, and markets with high income levels that enable high profitability, such as the United States, Europe, Japan and South Korea, among others.

“The company believes that Australia uniquely complements our operations in South America, maximizing sales opportunities and operating synergies, reducing risks and contributing to our strategy of consolidation in the animal protein export market,” the statement said.

“With the potential creation of the joint venture set forth in Australia MoU, in partnership with SALIC, the company is seeking to maximize new business opportunities, in order to meet the growing global demand for animal protein, always respecting our commitment to financial discipline.”

Processing joint venture to be built around Merredin Farms flock

In an investor briefing last year, before the listing of Minerva subsidiary Athena Foods on the New York Stock Exchange, AF said it intended to establish a footprint in Australia for the first time.

The briefing suggested that initially, Athena will target the sheep meat sector in Australia, with a focus on operations in Western Australia. The company has earmarked ten potential takeover targets among WA sheep meat processors, ranging in size from 4000 to 22,000 head per week. The company appeared to have prioritised outright purchase of an existing facility, over JVs, or building a new sheep meat plant in WA.

The briefing said Western Australia presents a unique expansion opportunity for Athena.

“Australia is the world’s largest exporter of sheep meat, and the second largest exporter of beef, with China a main destination for those products.

“The country’s meat products are perceived as of higher quality, which is reflected through higher prices,” the briefing said.

“Australia is by far the most efficient place to produce (referring to production, not processing) sheep meat in the world, in terms of scale and capacity to allow exports.

“Local meat production has seen significant productivity gains over the past 20 years, especially in the lamb segment.”

Athena Foods chief executive officer Iain Mars told Beef Central Western Australia was chosen for its entry into sheep meat processing in Australia because of its relatively large sheep flock, about 15 million head — and the purchase by SALIC of Mr Nicoletti’s company Baladjie Pty Ltd, now trading as Merredin Farms.

Mr Mars said the SALIC sheep flock would form a supply chain livestock foundation around which Athena’s proposed WA sheep processing business would be built. Some exports would inevitably be directed to the Middle East, but the Australian production from the business would be exported worldwide, he said.