May 25, 2015

 

Brazil beef re-entry into China market ruffles Australian farmers

  
       

China has ended a three-year import ban on Brazilian beef, which could mean an annual US$500 million worth of bonanza for Brazilian cattle farmers.

 

The lifting of the ban, which was imposed three years ago due to mad cow disease issue, was announced last week during Chinese Premier Li Kequiang's state visit to Brazil.

 

The reopening of the Chinese market to Brazilian beef has rather ruffled Australian farmers, who fear they're facing a formidable competitor in Brazil, the world's largest beef exporter. (Australia trails as the third-largest beef exporter.)

     

Brazil exported $1.5 billion of beef to China annually before the 2012 ban while Australia's yearly exports to China is about $750 million.

 

Jed Marz, chief executive of the Cattle Council of Australia admits that "having another competitor could have an impact on the volume of Australian beef exports to China".

 

But Mr Martz finds comfort in an upcoming free trade deal with China, which "will give us a comparative advantage with our exports in future".

 

Australia's free trade agreement (FTA) with China is expected to be signed next month and become effective in November. It will cut tariffs on beef product by 12 to 25% over nine years.

 

Meat and Livestock Australia said Australia would have preferential access to the China market once the China-Australia FTA comes into force.

 

FTA and food safety

 

Trade and Investment Minister Andrew Robb also said China's lifting of the ban on Brazilian beef "underlines the importance of the FTA we have concluded with China".

 

"When our FTA enters into force, we will benefit from the elimination of 12-25 per cent tariffs on beef over nine years, which Brazil will continue to face", he said.

 

Australia also relies on its "reputation for food safety and being a reliable supplier", according to Martz.

 

Robb agrees saying, "Unlike Brazil, we already have a strong foothold in the Chinese (/search/?q=China%2C+beef) market as a reliable supplier of premium quality, grassfed beef".

 

A spokeswoman for Meat and Livestock Australia also said "Australian beef has enjoyed continuity of access to the China market and our beef is highly regarded".

 

Australia managed to grab about 75% of China's over $1-billion red meat market by exporting $750 million worth of beef in 2013-14.

 

Does Australia really have to fear Brazil?

 

Perhaps not in the near term, at least. Trade analyst Alan Oxley believes Australian beef exports will be least affected by the Brazil-China deal.

 

"There is plenty of room for expansion in the Chinese beef market ... it seems demand is outstripping Australia's capacity to supply so there is room for Brazil to grab a share of what is an expanding market," he said.

 

Affected or not, Martz said, "We are used to competition, given 70 per cent of what we produce is exported".