Beef exporters race to beat China’s quota trigger-point

Jon Condon, 06/08/2019

THE massive spike seen in China’s Australian beef imports last month makes more sense when looming changes to import duties due to the strong likelihood of quota levels being triggered are taken into account.

As reported in this separate item this morning, China for the first time was Australia’s single largest export beef customer by volume in July, taking a record 28,214 tonnes of chilled and frozen Australian beef – more than either Japan or the United States. In fact China shipments accounted for almost 25pc of Australia’s entire July export beef trade.

Trade sources told Beef Central that a number of factors were behind the recent dramatic spike in trade, but by far the most significant was looming changes to tariffs on beef imports.

Following the China Australia trade agreement which entered into force in late 2015, an annual quota applies on Australian beef volumes, above which duties are designated to rise from 6pc to 12pc.

At the time the agreement was signed, nobody anticipated that Australian beef trade into China would grow as rapidly as it has, Beef Central was told by trade sources this morning.

The China quota level actually triggered last year for the first time, but it happened very late in the year during mid-December, and as a result had little consequential impact on Australian beef trade.

This year is a different story, however. With calendar year volume into China already reaching 146,244 tonnes to the end of July – a 65pc rise on the same period last year – Australia’s quota will be reached sometime between mid and late August, trade sources told Beef Central this morning.

The 2019 quota level is around 174,000 tonnes, representing about a month’s worth of trade before the trigger-point is reached, at current rates of shipment. After that, all Australian beef entering China for the remainder of the year will attract a duty of 12pc. There was very little likelihood of the Chinese Government waiving the duty rise, Beef Central was told, despite the protein shortage emerging due to Swine Fever.

It’s a classic case of the export beef industry being a victim of its own success.

One exporter with strong trade connections into China told Beef Central this morning that it had Chinese importer customers that had originally planned for shipments in the late-August/September period, that had pushed hard to bring those shipments forward, to escape the duty impact.

“They’re saying, even if it’s only a 20-foot container instead of a 40-footer, just ship it as soon as possible’,” he said. “They want imports arriving before the end of August.”

The looming prospect of a doubling in duties after the quota is reached has sparked the massive rise seen in Australian exports during July.

Beyond the quota/duties issue, demand for Australian beef out of China is also being impacted by:

  • The impact of African Swine Fever on the domestic Chinese pig population, pushing importers and Chinese consumers towards other proteins, including beef
  • The Chinese government clampdown this year on the illegal grey-trade in beef arriving through neighbouring Vietnam and Hong Kong; and
  • The general increase in demand for beef among middle-class and more affluent Chinese consumers.

















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