China market gets crowded

The race to secure our slice of Chinese beef imports


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Prime Minister Malcolm Turnbull and Premier Li Keqiang of China at Parliament House in Canberra during trade talks in March. Photo: Andrew Meares

Prime Minister Malcolm Turnbull and Premier Li Keqiang of China at Parliament House in Canberra during trade talks in March. Photo: Andrew Meares

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With the world's top 10 beef exporting nations now accessing China, Rabobank's Angus Gidley-Baird says the market is getting crowded.

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The number of guests invited to the show that is the China beef market has just been extended and the room is getting crowded.

After 13 years’ absence, the US has signed a trade agreement with China allowing the US to export beef to China. With Brazil having regained access in 2015, this now means that nine of the world’s top 10 beef exporters have official access to China. The odd one out being India which already supplies large volumes through grey channels. While this is a smart move from China – diversifying its markets to manage supply, price and product variability – it does mean that Australia now has another competitor in this big and growing market. In 2016, China was Australia’s fifth largest beef market, behind the domestic market and our top three trading partners, Japan, US and South Korea.

It is hard to accurately say what the impact of US access will have on Australian product, however, US trade volumes are expected to start relatively slowly and grow over time. The US will have to comply with similar protocols that Australia and other exporters are required to meet. It will need to have animal traceability and free of HGPs and feed additive Ractopamine. These three requirements will narrow the potential volume of US cattle. Furthermore, cattle that currently meet these requirements in the US are more than likely destined for the EU or the high-end restaurant trade in the US, both of which pay a premium.

US-fed beef is different from the grass-fed product that currently dominates China’s imports. It will require time to develop a sizable market for US grain-fed product, and a great deal of promotion and consumer education.

However, the US does have form in China. Back in 2003, before it was excluded from the market, it accounted for 80pc of China’s beef imports. Although this was only 46,000 tonnes, and given the market’s astronomical growth, the same volume today would be equivalent to 40pc of what Australia sent in 2016 when we accounted for 20pc. You only have to look at neighbouring Japan and South Korea with similar cuisines, however, to believe that there might be a large market for US-style product in the market.

China’s beef imports are expected to reach almost two million tonnes in 2020. Based on this forecast, current exporters could double their volumes and it would still allow about 200,000 tonnes for the US to grow into. So volume may not be the problem, but price competitiveness will be. The US produces a high-quality product that will provide direct competition into many of our markets. Developing and remaining competitive will be critical to maintaining our market position. 

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