April 15, 2014

 

 

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.

 

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% in the past year.

 

Importing live cattle would not only be a windfall for outback ranchers, but make economic sense for China, with abattoirs there running at only 30% of capacity and labour costs around a fifth of wages in Australia, say beef industry firms.

 

China and Australia are keen to finally commence live cattle trading, having seen a 1998 deal fail because of regulatory issues, say Australian officials.

 

Chinese officials visited Australia in March 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.

 

Australia is the world's third-largest beef supplier, after the US 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 to produce halal meat.

 

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.

 

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 as it strives for self-dependency. It would also benefit Australia's cattle ranchers in the Northern Territory and Western Australia, with the Territory capital Darwin already a live cattle export hub to Asia.

 

It would also allow access to underutilised feedlots and abattoirs in China, reducing costs for both ranchers, who have to transport cattle vast distances to reach abattoirs, and buyers in China.

 

Chinese beef imports this year could hit 550,000 tonnes, up nearly 40% from last year, the USDA attaché in Beijing has forecast.

 

The Organisation for Economic Co-operation and Development expects beef consumption to become the fastest growing for meat in China, increasing 7% 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 (ABARES) expects live cattle exports to hit a five-year high of 600,000 head in the 2014-15 season, worth AUD600 million (US$565 million) to the industry. Driven mainly by Indonesian demand, ABARES expects live cattle exports to grow steadily, peaking at 875,000 in 2018-19.

 

Any live cattle deal with China would shake up Australia's exports, but with Australia's largest cattle producing state Queensland in drought, and suffering record stock culls, the full implications would not be until ranchers re-stocked herds.