Australia eyes China’s ‘insatiable hunger’ for beef as imports up 40%
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.
Cattle baron Graeme Acton, Australia’s largest rancher and already a major beef exporter to Japan, South Korea, and south-east 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 around 1.62m hectares of grazing land in Queensland and about 180,000 cattle.
China and Australia are keen to finally commence live cattle trading, having seen a 1998 deal fail because of regulatory issues.
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.
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, born into a family of cattle ranchers and spending his early years as a “jackaroo” or ranch hand, has partnered with pastoral firm Elders to promote the trade.
Forrest has increased his cattle properties in Western Australia, site of his iron ore mines, to more than 7,000km sq, about a third of the size of Israel.
Australia is the world’s third-largest beef supplier, after the US and India, and has been exporting live cattle to Indonesia since the early 1990s. Its drought-resistant Brahman cattle, grazing in the sparse outback, 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 illusive. 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 of the industry group 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 as it strives for self-dependency.
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.
“There is a clear benefit for the Chinese to use excess capacity. Their labour costs are still significantly lower in the processing sector than Australia,” said Craig Aldous, China-based general manager at Elders Fine Foods.
Liu Chunsheng, sales manager at Fuhua Meat, a beef processor in Beijing, said the firm is currently only using about 40% of its capacity, which is still better than most of the industry running as low as 30%. Chinese beef imports could hit 550,000 tonnes this year, up 40% from last year.
The Organisation for Economic Co-operation and Development expects beef consumption in China to increase 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 expects live cattle exports to hit a five-year high of 600,000 head in the 2014/15 season, worth €410m to the industry.
