Brazilian and Argentinian beef are traditionally sold as beef jerky or sliced beef in China, added Gerrard Liu, co-founder of Chinese research and consulting firm Meat International Group.

But Aoniubao, which specialises in delivering beef anywhere in Beijing within two hours of an order being placed, recently started offering Brazilian steaks, as there has been a rising demand for cheaper beef.

Retail prices of Australian beef in China are often 50 per cent more expensive than South American beef. On Aoniubao, 500g (1.1 pounds) of Brazilian steak currently sells for 75 yuan (US$11.50), versus 112 yuan for the same amount of New Zealand beef, and about 140 yuan for Australian Wagyu rib-eye steak.

Two months ago and halfway around the world, Carne Hereford S.A. – a company founded by Argentinian cattle breeders – started a joint venture with beef-supply-chain platform BeefLedger and Shenzhen-based importer Australasia (Guangzhou) Food, aiming to export premium-cut Argentinian beef to China under the brand name Aliarg.

“Due to [lockdowns and business interruptions] caused by the pandemic in Europe, the main suppliers in Argentina and Uruguay were forced to seek new markets and have redirected their 2020 premium beef production to the Chinese market at a lower price,” said Juan Litovichi, managing partner at BeefLedger South America.

Import ban sees Australian lobster disappear from Beijing markets, restaurants

The profit margins may be lower in China, but at least it helps the group get its foot in the door.

“We have been undertaking detailed market feedback with restaurant owners, chefs, and also people on the streets in and around Guangzhou. The feedback has been very positive,” BeefLedger chairman Warwick Powell said. “It is striking a chord in terms of value for money.”

The results are showing.

South American and American beef have started to edge out Australian exports in China – the world’s biggest beef importer – over the past year. From February 2020 through January, the volume of frozen and chilled beef exports from Australia fell 25 per cent compared with the previous 12-month period, while similar exports from Brazil and Argentina rose 109 and 29 per cent, respectively, according to data from Meat & Livestock Australia (MLA).

The US Meat Export Federation said the volume and value of American exports to China rose 800 per cent in January compared with a year ago. In September, the US also overtook Australia as China’s largest grain-fed beef supplier, the federation said in a report.

“Australian exports did decline in 2020, due to very tight supply in Australia. I think all other countries, including Brazil and Argentina and the US, can benefit from the situation,” said Pan Chenjun, senior analyst at Dutch bank and agribusiness consultancy Rabobank.

Part of the decline in Australian exports can be attributed to decades-low beef production. After years of drought, rain has given cattle farmers an opportunity to re-herd, resulting in lower slaughter rates.

A new forecast by Rabobank Australia this week said that the slaughter of cattle in the country was expected to fall 6 per cent this year compared with last year. Consequently, exports are expected to drop 5 per cent, with live export numbers also forecast to decline by the same amount.

An MLA update this week indicated that Australia’s beef exports during the year’s first quarter were down 25 per cent, year on year.

In contrast, there is beef production aplenty in the US and South America, particularly Brazil – the world’s biggest beef exporter.

Although not as productive as Australia, South America is slowly becoming the core supplier of beef to China, US-based food industry economic consultancy Steiner Consulting Group said earlier this month at the online Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Outlook Conference.

China will account for 75 per cent of Argentina’s beef exports this year, 55 per cent of Uruguay’s, and 60 per cent of Brazil’s.

ABARES itself anticipates that, until 2023, the US and Brazil will increase beef exports to China.

“An increasing Brazilian cattle herd and a weak real suggest that Brazilian beef exports will continue to maintain a significant presence in global beef markets through the outlook period,” ABARES said in an outlook.

Just as taste is a drawcard for Australian beef in China, Chinese diners can find the same allure for Brazilian beef in more practical ways, said Lhais Sparvoli, international relations manager at the Brazilian Beef Exporters Association.

“Brazil’s beef is leaner and more suited to everyday cooking at home,” she said. “These two markets do not usually compete. Taking into consideration Chinese consumption habits, Brazilian beef [actually] occupies a larger space than Australian and American beef.

“Australian beef is usually more marbled; it is more like American beef and is [mainly] suitable for restaurants and gourmet cuisine.”

Thus, Sparvoli said, South American beef should be able to stand on its own in China without competing with Australian beef.

01:15

China-Australia trade: Beijing set to ban nearly US$400 million worth of Australian wheat imports

China-Australia trade: Beijing set to ban nearly US$400 million worth of Australian wheat imports

Additionally, China has approved many facilities in Brazil and Argentina to export beef to China. “So, we should see structurally higher trade flows in this area,” said Darin Friedrichs, a senior commodity analyst at StoneX Group in Shanghai.

Exports at a fifth were stopped in August, and a sixth was blocked in December. The Australian Meat Industry Council told the Post last week that there had been no change to the bans.

But it has not all been smooth sailing for South American exporters. Last week, several beef-packing facilities in Brazil halted production due to high costs and squeezed margins.

Despite higher demand from China, domestic demand in Brazil has been weak due to the economic slowdown caused by the pandemic, resulting in cutbacks.

Brazil’s second-biggest food processor, Marfrig, furloughed sent employees at a unit in the town of Alegrete for 30 days before resuming slaughtering on April 1. The company also temporarily halted a plant in Rondonia state.

Minerva Foods, South America’s biggest beef exporter, halted operations at a Mato Grosso state facility and has not set a timeline for resumption.

Simon Quilty, an Australian agricultural expert and managing director of MLX, a company that specialises in brokering beef swaps, expects a fall in beef exports out of South America at some point this year due to the increased “mining” of its herd.

“Given the extent of South American exports into China over the past two years, that has seen a liquidation of the region’s young female herd,” Quilty said.