AUDITS on the six Australian beef processing plants dealing with China’s recent suspension over labelling issues are now complete.
Exporters are “waiting patiently” for news on whether Chinese officials have been appeased.
It appears the concerns stem from minor operational matters easily fixed but analysts say the real issue is how long it takes to convince those on the China side that there is no risk and business as usual should be resumed.
Notwithstanding the $100 million potential cost Australia’s trade minister has put on the fall-out of the suspension, analysts point out it is just one event on a very complex current global beef trade scene.
To put it in context, Australia exports 10 per cent of its beef to China and has 31 plants accredited to supply China.
Rabobank senior analyst animal protein Angus Gidley-Baird said that equates to around a 25,000 head capacity, with the six plants involved in the suspension accounting for 6000 head.
“We don’t know how much those individual plants focus on China but there is the ability to balance this out and it should be a short term thing that is easy to resolve,” he said, during a talk at the Graham Centre Beef Forum in Wagga Wagga this month.
Indeed, international beef trade is an increasingly complex beast with people pulling levers all over the place.
Interestingly, Mr Gidley-Baird believes Chinese pork production will be something that plays a key role in the fortunes of Australian beef producers in 2017.
A two percent lift in pork production in China, a country which already has 375 million pigs, is expected this year.
“That increased pork production means China’s demand for imports will decrease,” Mr Gidley-Baird explained.
“The Canadians, Americans and Europeans sending pork to China will find they have more in their markets, keeping competitive pressure on retail prices for all proteins,” he said.
“Beef producers sending product to the likes of the US will find they have increasing pressure from pork.”
India’s cattle ban
Meanwhile, the Supreme Court in India has just upheld a High Court decision that the government’s ban on the sale of cattle for slaughter can not be implemented.
A political and religious decision, made in accordance with the Indian president’s election platform, the ban sent shockwaves through the international beef scene given India is one of the world’s largest exporters of bovine product.
US Department of Agriculture figures show India last year exported 1.7m tonnes of bovine product, compared to Australia’s 1.4m.
The Indian Government now has three months to revise its policy.
Mr Gidley-Baird said if India stopped supplying beef to the world, it should not have a big direct impact on Australia.
“I’d argue Australian beef shouldn’t be in the same market as Indian buffalo and therefore a direct substitution is not necessarily going to occur,” he said.
“It’s a cheap commodity red meat. Vietnam is their biggest market and a lot of that finds its way to China.
“Poultry and pork might be more direct beneficiaries if India implemented the ban.”
Corruption scandals in Brazil have highlighted just how sensitive the world beef market is to food safety issues, according to Mr Gidley-Baird.
When global media outlets broke news about possible tainting of Brazilian beef exports in March, every country importing their product shut the market immediately.
“Brazil did a wonderful job in the couple of days that followed to explain to its customers it wasn’t a food safety issue but a corruption issue and to their credit they were able to get all their export markets opened again within a week,” Mr Gidley-Baird said.
More recently, the US has closed its market to Brazil over further food safety concerns.
That won’t have a big impact on Brazil in the sense that very little volume went to the US, Mr Gidley-Baird said.
“The bigger impact will be the fact the Brazilians were using that US access to bolster arguments for better access into the likes of Japan and Korea,” he said.
“Effectively, it gives us breathing space space in these markets.”
The other issue at play with Brazil is their changing economy, which affects the willingness of the Brazilian consumer to eat red meat.
Given 80pc of Brazil’s product is consumed at home, any shift from the local customer away from beef means larger volumes need to be sent to other markets.
The story Beef plants suspended from China play the waiting game first appeared on Farm Online.