Australia sets sights of beef exports to China after success of Japanese deal

Long-stalled efforts by Australia to sell live cattle to China are gaining fresh impetus from negotiations to secure a bilateral free-trade deal

PUBLISHED : Tuesday, 15 April, 2014, 12:21am
UPDATED : Tuesday, 15 April, 2014, 12:21am

Hot on the heels of winning lower tariffs for beef exports from its largest buyer Japan, Australia is setting its sights on winning another major prize for its beef industry by persuading China to open its market to live cattle sales.

There is a clear benefit for the Chinese to use excess capacity [at abattoirs]

China's growing middle class seems to have an insatiable hunger for beef, but with limited domestic stock, beef imports are hitting record levels, jumping 40 per cent in the past year. Importing live cattle would not only be a windfall for Outback farmers, but make economic sense for China, with its abattoirs running at only 30 per cent of capacity and labour costs around a fifth lower than in Australia, say beef industry firms.

Cattle baron Graeme Acton, already a major beef exporter to Japan, South Korea and Southeast Asia, has his sights on Asia's expanding market.

"Live cattle would be a highly lucrative market for us ... I think it would complement the boxed beef market, which has grown into a massive market for us in just the last year," said Acton, who has about 1.6 million hectares of grazing land in Queensland state and about 180,000 head of cattle.

China and Australia are keen to finally start live cattle trading, having seen a 1998 deal fail because of regulatory issues, say Australian officials. Chinese officials visited Australia last month to discuss live cattle trade issues, and with Australian Prime Minister Tony Abbott in Beijing last week for free-trade deal talks, hopes of one day mustering cattle for China are rising.

Abbott secured a free trade deal with Japan last week, which included a reduction in Japanese beef tariffs.

The lucrative prospects of live cattle to China have even attracted Australian mining magnate Andrew "Twiggy" Forrest, a major iron ore supplier to China. Forrest has partnered with pastoral firm Elders to promote the trade. Forrest has increased his cattle properties in Western Australia to more than 7,000 square kilometres.

Australia is the world's third-largest beef supplier, after the United States and India, and has been exporting live cattle to neighbouring Indonesia since the early 1990s. Its drought-resistant Brahman cattle, grazing in the sparse Outback in the north of Australia, is the preferred beef for Indonesia's mostly Muslim population, who slaughter cows according to Islamic practice.

But the dream of cracking the Chinese live trade market has been elusive. Biosecurity concerns, raised by the Chinese delegation in March, are seen as one of the stumbling blocks.

"The Chinese technical delegation were here to discuss some of the health concerns they have ... and hopefully we will be able to find a resolution where we can export cattle to China," said Alison Penfold, chief executive of the Australian Live Export Council.

A deal with China would reduce Australia's dependence on Indonesia. The trade has suffered disruptions over animal cruelty concerns and import curbs by Jakarta.

It would also benefit Australia's cattle farmers in the Northern Territory and Western Australia. In China, the trade would allow access to underutilised feedlots and abattoirs in China.

"There is a clear benefit for the Chinese to use excess capacity. Their labour costs are still significantly lower in the processing sector than in Australia," said Craig Aldous, China-based general manager at Elders Fine Foods, who estimated costs at around a fifth of Australian wages.

Liu Chunsheng, sales manager at Fuhua Meat, a beef processor on the outskirts of Beijing, said the firm was using only about 40 per cent of its capacity, which is still better than most of the industry running as low 30 per cent as demand outstrips stagnant domestic production.

Chinese beef imports this year could hit 550,000 tonnes, up nearly 40 per cent from last year, the US Department of Agriculture attache in Beijing has forecast. The Organisation for Economic Co-operation and Development expects beef consumption in China to increase 7 per cent per year over the next eight years to an annual consumption of around 850,000 tonnes.

The Australian Bureau of Agriculture and Resource Economics and Sciences expects live cattle exports to hit a five-year high of 600,000 head in the 2014-15 season, worth A$600 million (HK$4.3 billion) to the industry.