Upwards of 30 attentive stock agents surrounding the Western Border were briefed last week in Warrnambool on the potential of the China live export trade which has already exported its first shipment of slaughter cattle to the expanding and exciting new market.
Wellard Rural Exports, who earlier last month announced the purchase of the 340-hectare Condah property, Clonlee as pre-export quarantine property, called the informal discussion to acceptance and to advise some of the trade’s required protocol.
Warrnambool agent, Phillip Keane, Rodwells, said the mood of the gathering was particularly receptive given the short notice, and the fact the meeting coincided with a heavy day of markets throughout the western region.
“My view is, if it all falls into place as they suggest, it will be another good marketing alternative for our producers,” he said.
“It was explained the whole thing is in its infancy. There is a lot of new infrastructure being built in China to conduct the trade, and there a number of players keen to participate.
“Price they said will be a sense issue but threshold levels at where the trade might being although lower will place a very solid base in our price structure,” he said.
“If it happens, it happens and if it doesn’t we lost nothing by listening.”
A fellow southwest agent and Warrnambool stock agents’ president, Jack Kelly said agents from Camperdown in the east to Naracoorte, SA had attended.
“They (Wellards) were given a good hearing and good discussion evolved from the questions asked,” he said.
“We are used to the protocols required by China with our involvement in dairy exports so that side of the business was not overwhelming for many.
“The main aspects for eligibility will be proof of last property 90-day identification. And given initially it’s a slaughter-only trade, with weights of 500 to 650kg requirements, few agents that saw as a problem.”
Wellard chief business development officer, Scot Braithwaite who is based in Indonesia, said the purchase of the Condah property – 60 km inland from the Port of Portland - will be tied into the China program and basically us a depot and quarantine/feeder assembly station.
“It will have two uses, firstly to complete a significant dairy order to Sri Lanka over the next two years or to assemble cattle for the China trade,” he said.
Mr Braithwaite told Stock & Land the commencement of a regular trade to China was more dependent of price than cattle availability.
He said there are two or three importers in China that stand ready to import cattle but prices currently are a bit high for them to begin and make the financials work properly, given that prices here in Australia are at or near record levels.
Mr Braithwaite said that when industry players began exploring the opportunities for a trade with China (and working on the protocol) a couple of years ago prices were at a very different level: perhaps $1.50/kg less than it is today.
However if the price were to soften to under the $2.80/kg rather than the $3.30/kg levels of today then perhaps we will see some interest and movement towards China.
Mr Braithwaite said that while it might not sound terribly exciting on today’s money he foresees a market of $2.50 to $2.80/kg to be a comfortably trading range for slaughter cattle that requiring within 14 days of arrival. He said there are also restrictions on who can participate in the trade: the facilities must be new, a certain distance from the port, and the abattoir must also be a certain distance from the feedlot.
Local grown and imported cattle he said cannot be killed together.
Mr Braithwaite said the restrictions that surround the importation and slaughter of cattle into China from Australia actually stop persons are already in existing cattle/meat businesses in China from participating. However it is hopefully that once the trade become established and it is proven that there is minimal or no risk of disease from imported cattle being spread through China, that existing businesses may be allowed to participate in the trade with Australia and this, undoubtedly, will further increase demand.
Mr Braithwaite said the greatest increase in demand however will be seen when protocol is achieved to allow the importation of feeder cattle. In this initial stage, with slaughter-only cattle allowed, the numbers required for the trade are expected to sit at around the 200,000 to 500,000 head level annually but this could be expected to lift significantly when a channel for feeder cattle is opened.
In this initial slaughter-only stage however, Mr Braithwaite said that cattle offering weights in the 500-600kg category would be the most desirable. He said it was envisaged a preference for black cattle might be initially sought depending on price, and it would also depend on the individual importer and his customer outlets as to what suits at the money- some will chase the top end of the market, others may take a more budget approach opening up a very wide range requirements without particularly one specification.
Given that all cattle permitted to enter the China trade must be sourced from the non-blue tongue area. This will also allow a wide variety of cattle to become eligible, from shiny skinned cattle from northern WA (Broome/Geraldton) to cold country British bred types of southern Australia (Portland).
He said some importers, more particularly in the southern China, may look for the more western-style of cattle because of the higher temperatures in those respective areas while the more traditional southern cattle could be more appealing to importers based in the cooler climates in China.
Like Australia, he said China is a big country and that China has a lot of food resources left over after they feed their population that will make great feed for cattle.
In shipping terms Mr Braithwaite said the costs associated with the movement of stock from the various ports in Australia to the various ports in China would have significant bearing on successful outcomes.
“The time required for movement of cattle from Portland to the north of China shipments he estimates would involve about 14-15 days whereas shipping from say Broome/Geraldton to southern China is about 10 sailing days which is similar time ships take to travel from Townsville, Qld to Vietnam,” he said.
“I don’t think the trade will begin with a rush,” he said. It will take an amount time perhaps three years (2018) before supplies from Australia become sufficient, prices become affordable and also a level of expertise developed in China to process, sell and deliver the product on regular and consistent basis.
He said the important thing for Australians to consider will be that the trade with China will become another marketing opportunity, and particularly in drier times when producers find it difficult to meet slaughter specification for local Australian processors.
“There will be outlet willing to consume a broad variety of cattle product to put a strong floor in your markets” he said.
Mr Braithwaite said one of the main reasons that southern Australia (Portland) is a preferred sourcing area is because of its non-Blue Tongue zoning, and that the region has become very experienced dealing with the restrict protocol demanded by China in the live export of dairy cattle.
Mr Braithwaite said that over time he suspected the trade to China would underpin a strong demand in the southern cattle market as it has done on northern Australia with the live trade to Indonesia and Vietnam.
Producers in the north he said have grown in confidence with the expanding live trade as it has developed to provide reliability in turn-off regardless of the overcome of the season.
And in terms of price he said it has been shown that the lower prices soften in Australia that more importers have emerged seeking cattle which has helped to consolidate market forces when they’re most under pressure.
In this it has provided producers with confidence that they can focus on expanding their herds firm in the knowledge there is broad live export inquiry when seasons aren’t fulfilled and cattle don’t grow and prefer as planned.