DURING the past three years the Scone saleyard has lost more than $1 million in revenue, with Council predicting another deficit this year due to small yarding numbers and COVID-19 impacts.
In the last two years, Council spent $11.8 million conducting major renovations to the saleyards and now need to cover loan repayments, plus offset ongoing losses.
However, as the Upper Hunter emerges from drought, Council remains confident that the saleyards will begin to break-even in three years time.
After reviewing Council’s draft budget, Scone resident and former Council general manager, Daryl Dutton said Council has been disguising the saleyard’s operational losses and they should “come clean”.
“The accumulated losses in excess of $1.5 million over the budget period are not funded and are inappropriately disguised,” Mr Dutton said.
“For the average person you would just look at the bottom line and you’d say ‘oh, they balance out, they pay for themselves,’ but you’ve got to go below that and have a look at the transfers to and from restricted assets, which is a reserve system,” he said.
“The accumulative losses over the period since they did their capital works, until the end of their current budget period, which is in the years 2023-2024, that’s $1.54 million worth, so how many years after that does it take to pay back that loss?” questioned Mr Dutton.
“They need to account for this publicly and properly, if they’re making a loss, they’re making a loss, they can’t keep disguising it…Council must come clean” said Daryl Dutton.
David Gatwood, Upper Hunter Shire Council Business Services Manager and Head of the Saleyard Committee, said the restricted asset transfers assist Council when budgeting for a deficit.
“The restricted assets are there, to an extent, to defray some of those costs or those overruns in terms of when we are budgeting for a deficit,” said Mr Gatwood.
“The plan is, in about a three year period, to bring that back into a break-even scenario and beyond that we want it to be a profitable enterprise,” he said.
“Obviously what we need to work through in the interim, is we are still technically in drought, so that is going to affect numbers,” he said.
“Effectively, in the budget we are predicting there will be a deficit for this year, in terms of revenue versus expenses of the saleyard,” said Mr Gatwood.
Mr Gatwood acknowledged the outstanding loans incurred from the recent saleyard upgrades and said it’s now a matter of trying to build the numbers back up to ‘what they were’ by expanding the type of sales that operate there.
“Obviously after completing the $11.8 million refurbishment, there are loans that need to be paid and were coming out of the severe drought period where the sheer number of cattle going through that yard is substantially down than what it was a number of years ago,” Mr Gatwood said.
“We would be looking at the next two to three years to reign in that deficit situation, to bring it back close to a break-even position,” he said.
“It’s really about appreciating that we’ve got a brand new facility that is still settling in,” he said.
When the Council embarked on the upgrades in Scone, there was limited competition, however since then the Singleton Council has invested heavily in their salesyards, Tamworth and Singleton have privatised their saleyards and other regional areas are becoming more competitive.
“What we’re trying to do is ensure we’re marketing it to a broader market and at the same time, make sure we’re getting quality put through the saleyards,” said Mr Gatwood.
“Obviously, there are privatised saleyards in Tamworth and Singleton and they’re a competitive force and we’re well aware of that,” David Gatwood said.
Maurice Collison, Upper Hunter Shire Mayor said although it may take a few years to pay off the Council debt, he is confident that the saleyards will come out the other end as one of the best in the State.
“I’d say it’ll take three years to get the numbers back to where we came from and then another two or three years to put that additional money back in off those losses and to me that’s still a good business case,” said Mayor Collison.
“We’re running, I think off the top of my head about $400,000 per annum loss at the moment, but it’s important to understand that those losses are going into quarantine Council reserves and that’s more or less like an overdraft,” he said.
“Yes, that’s a Council debt, but what we’re saying is when this gets up and running again and we start making money again, which I’m confident is going to happen, that money will be put back in, paid for, from the saleyards revenue, but it is going to take some time to do,” he said.
Mr Dutton said he supports the saleyards, but they have been overcapitlaised with the recent upgrades.
“I actually support keeping the saleyards operational in Scone…they definitely have improved, no argument there but at what cost?” questioned Mr Dutton.
“I like to see them improved and meeting animal welfare and all of the other occupational health and safety requirements, but they’ve overcapitalised it, they’ve built sheds, roofs, which do nothing to the operations of the saleyards,” he said.
“There’s a shed there that can take 500 head of cattle and it cost $1 million,” he said.
“They’ve then spent a further $12 million, nine of which has come from Council and they’ve built a roof over the rest of it so they can virtually house up over 2,000 head of cattle,” he said.
“The capacity of selling there hasn’t increased, it always had the ability to hold and sell 2,000 head of cattle,” he said.
“Think about the cattle that have been out in an open paddock for 364 days of the year and they’ve got to come in and have a roof over them for one night before they get killed?” questioned Mr Dutton.
Mr Gatwood said the upgrades were all about animal welfare and protecting the condition of the cattle that go through the saleyards.
“The worst possible scenario is, take your mind back to earlier this year when we had 45 degree days, cattle get stressed very quickly, so if conditions are extreme, that’s not favourable for the cattle,” said Mr Gatwood.
“They can lose condition quickly and some can go lame, while some would say it’s overcapitalisation, it’s all about protecting and providing the best environment so we can get the best prices,” he said.
Mayor Collison agreed with Mr Gatwood and said the saleyard scope of works was discussed with the agents associated with the saleyards.
“We’ve set our budget back…but of course we know the scope of works at the saleyards, the original saleyards came in on budget, but we changed the saleyards scope of works with the agents because we wanted an additional $220,000 spent on extra roofing,” Mayor Collison said.
“It’s all animal welfare and it’s very much to do with the welfare of the workers as well, like the press button gates where they don’t have to get in with the livestock and hunt them at the risk of getting hurt, especially for export cattle, which didn’t like concrete,” he said.
“The short story is the saleyards were worn out the way they were, completely to the end of their lifespan, so we had no alternative but to do it and we decided we’d do it properly,” he said.
In a letter to Council, Daryl Dutton said the 2020 and 2021 revenue predictions are highly inflated and unlikely to be achieved.
“In the budget for last financial year, they actually predicted a 42 percent increase in revenue from one year to the next, that’s just ridiculously over optimistic, can’t be sustained and impossible to achieve in reality…the fees are already 64 percent higher than Singleton and 15 percent higher than Gunnedah,” Mr Dutton said.
“The predicted revenue for 2020-21 is predicated on a 25 percent increase in costs to local farms and cattle producers to sell their cattle next year, on top of the 40 percent increase over the last two years,” he said.
“They actually have to double their fees and charges, the break-even point is twice the revenue they’re currently getting, they need twice the amount of cattle going through the place or double their fees if they’re going to be able to pay for themselves,” he said.
“I question their projections because I think the losses will be higher than what they’re trying to project, because I think they’re exaggerating the revenue they’re going to get because at the end of the drought, there will be less cattle,” said Mr Dutton.
“So, looking to the future, saleyards are going to be less and less used and yet Council is trying to say they’re actually going to increase their revenue in the future?” questioned Daryl Dutton.
Mr Gatwood said the next Saleyard Committee meeting has been set down for September 1, during which many agenda items revolving around the future of the saleyards will be discussed.
“One of the things that we do through the committee is sit down with the agents and discuss the user fees and charges on an annual basis and those are agreed upon and locked in for a 12-month period,” Mr Gatwood said.
“Clearly with all of the investment that has gone into the saleyards to bring it into a state-of-the-art facility, there was general understanding that those fees need to increase,” he said.
“We’ve had some recent rainfall so that was very positive and hopefully that will be reflected in the coming weeks and months and we’ll start to see some more of that good quality cattle coming through,” he said.
Mayor Collison admitted the figures were optimistic, but said even in personal businesses “you can’t see into the future”.
“People are starting to restock and people have got confidence because they’re paying $2,500 for cows and calves, if there wasn’t confidence in the industry, why would they be spending that money?” questioned Mayor Collison.
“Farmers have had it tough, but a lot of farmer’s have made more money this year in cattle,” he said.
“We have an abattoir here which is booming, we have an equine industry here that’s booming, why can’t we have a cattle industry?” Mayor Collison questioned.
“We will come out with a proper budget when things improve…I am quite confident, I’ve farmed all my life, I’ve been through droughts, fires, floods etc and we always come out the other end,” said Mayor Collison.