Prospects of a breakthrough announcement during Brisbane’s upcoming G20 meetings over a live export trade protocol with China are looking increasingly remote, judging by media comments attributed to agriculture minister Barnaby Joyce overnight.
It’s been widely tipped for some time that a trade agreement over live exports to China might be announced as part of bilateral discussions to be held between Australian and Chinese officials during the G20 Heads of Government talks, taking place in the Queensland capital from November 15.
The Reuters newsagency overnight reported, however, that talks over trade access had stalled, based on biosecurity issues surrounding bluetongue disease.
“I was hoping we could get a deal by now,” Australia’s agriculture minister Barnaby Joyce told Reuters. “We are on the edge of securing a deal but unfortunately in trade, you can be on the edge for quite some time.”
Shipping live cattle from Australia to China has been discussed for many years. Official talks began in February and a team of Chinese scientists is currently carrying out on-site inspections, but there is no timetable for an agreement and no guarantee one will be reached any time soon, Reuters said.
Live exports could help curb high beef prices in China and open up a new market for Australian livestock producers. China’s total beef imports are expected to roughly treble to $9 billion by 2025, according to Australian government and UN estimates.
Any live cattle trade deal is now expected to be delayed until at least 2015, according to officials at regulatory agencies and industry bodies, Reuters said.
Despite buoyant demand for meat, limited land, water and feed is keeping China’s cattle herd from growing in size. Many feedlots and abattoirs are all but empty. Chinese beef production is expected to ease slightly in 2015 to 6.5 million tonnes, according to the US Department of Agriculture.
China has turned to meat imports to meet demand, including from Australia, the world’s third-largest exporter. It takes about half of its needs from Australia, buying A$785 million worth of red meat in 2013/14, according to Australian government data.
However, with rising competitive demand for Australian meat from the United States, Australian exports to China are set to stall at around 160,000t during 2014/15.
This has kept China’s domestic prices high at around 63 yuan ($10.28) per kilo in retail markets, just below a record 66 yuan per kilo, say analysts.
“Beef prices will remain at high levels in the short-term,” said Pan Chenjun, senior analyst at Rabobank. “China is already allowing more imports but the international market price is quite high.”
Although the price of Australian live cattle is at record highs – above 250c/kg in the northern port of Darwin – underutilised feedlots and abattoirs and cheaper labour in China should allow the Asian country to keep down costs, Reuters was told.
China’s regulatory agency, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), said a group of scientists was now in Australia, but offered no guarantee a deal with Australia would go ahead.
The delegation is looking at how Bluetongue is managed, Australia’s Department of Agriculture said. Analysts said that if a deal is agreed, it was likely Australian cattle would be quarantined for several weeks to ensure no sign of bluetongue was present.
For Australian producers, the stakes are high. “If beef demand in China takes off, there probably isn’t enough cattle in Australia to keep up,” said Willem Rudolf Westra van Holthe, minister for primary industry in the Northern Territory.
ESCAS compliance poses a challenge
During an Asian trade forum held in Brisbane last Thursday as part of Trade and Investment Week, Australian Country Choice’s David Foote said while ever the bluetongue ban remained in place on Australia, the number of live cattle that would be excluded for eligiblilty would be significant.
“Anything north of about Eden, on the south coast of NSW, would not be eligible for supply,” he said.
That would rely, therefore on going back into the north, and the west, which would be in direct competition with supply into Indonesia, Malaysia and elsewhere.
“It’s just going to become a supply/demand issue.”
Mr Foote sits on MLA’s South Asia marketing taskforce, the Indonesian and Chinese red meat marketing taskforces, and serves as deputy chairman of Australia’s China FTA committee.
“I think in the initial stages, at least, China may struggle unbelievably with complying with the ESCAS supply chain assurance system,” he told the forum.
“Given that these cattle are going to be on ships for 35-37 days, they then have to go into quarantine in China for at least 30 days before slaughter.
“Those animals will not be in slaughter condition when they arrive, so they will have to be managed. The import protocol will either require feeding, or quarantine and no feeding.
“So whilst it will happen, I think the trade will go through a lot of heartache, on both sides, before live exports becomes a threat to the beef business.”
Portside quarantine facilities in China currently were extremely limited, but that was not to say that if China wanted to see a trade develop, it did not have the capacity to make dramatic changes to port and quarantine infrastructure very rapidly.
Asked about cold chain infrastructure in China and how limiting it might be on future beef and live cattle trade, Mr Foote said his company had not experienced logistics as being an issue at the moment, in moving product around.
On grain imports, he suggested China’s biggest challenge would be in the notion of importing grain to feed to livestock, to feed to people.
“We’ve been told quite often by people within the Government circles that China will move from feeding the pig to feeding the person. Simply, their grain will be channelled into human consumption, not for animal production.”