News

Gina hatches plans for massive live export deal with China

Jon Condon, May 5, 2017

MINING magnate and rapidly-expanding beef producer Gina Rinehart appears to be on the brink of launching an ambitious plan designed to ultimately export up to 300,000 head of Australian live cattle to China each year at the end of its second stage.

Gina Rinehart

Gina Rinehart

The proposal, if fully executed, would require large numbers of cattle to be sourced from outside Ms Rinehart’s existing Hancock Prospecting pastoral interests, or those involved in her recently-established joint venture with S.Kidman & Co.

State and Territory Governments in Queensland, the Northern Territory and Western Australia were notified of the proposal on Wednesday this week, Beef Central understands.

Contacts in each jurisdiction were not prepared to share details of the communication, which was clearly marked “commercial in confidence.”

However Beef Central understands Hancock Prospecting is seeking state government support for a Memorandum of Understanding over the project, in advance of a planned visit to China later this month to progress the deal.

Speculation suggesting that the customer in China would be Shanghai CRED, the Chinese entity who joined forces with Ms Rinehart to buy S.Kidman & Co later last year – appears to be incorrect. Ports in southern China are understood to be the target destination for the trade in slaughter-ready cattle.

Government sources said the Hancock communication arrived this week “completely out of the blue,” and carried no supporting documentation about how such a project would impact along the Australian meat and livestock supply chain.

“There would have to be a lot of work done first, to consider the implications,” one government source said.

Beef Central approached Hancock Prospecting for a response to this week’s developments.

When asked about the size of the potential trade in cattle numbers, the company simply said it was a ‘big figure.’

Hancock spokesman Adam Giles said the company was still in early stages of negotiation, and could not provide a lot of detail. He did confirm that Hancock Prospecting was currently in negotiations to develop a commercial offtake agreement for the supply of cattle from northern Australia to China.

“If an agreement is formed it will take possibly several years before first exports were to take place,” he said.

“Supply agreements would also have to be established with Australian pastoralists. These new market opportunities would require the building of additional infrastructure across northern Australia,” Mr Giles said.

“Any increased levels of private sector investment would increase the number of jobs in the cattle supply chain and their related industries,” he said.

“Mrs Rinehart continues to look for opportunities that will see investment in northern Australia and the creation of Australian jobs.”

The proposed project immediately raises a number of questions about Australia’s live export market access to China:

  • Bluetongue status: the target livestock supply area is northern Australia, where bluetongue status is a major obstacle to live trade with China (see earlier Beef Central article on this topic). Is there some prospect ahead for relaxations in current bluetongue status?
  • The project also raises questions about HGP use: China bans the use of synthetic HGPs, and Australia’s current beef export trade to China is HGP-free only. Northern Australia is the dominant user of HGP in the Australian beef industry. Observers say it is hard to imagine that China would restrict HGP in beef exports, while accepting implanted cattle in live export form.

In December last year, Ms Rinehart and her Chinese minority investment partner, Shanghai CRED received FIRB approval for their takeover of the S.Kidman & Co. The completion increased Ms Rinehart’s combined cattle numbers held by existing Hancock Pastoral cattle properties and those held by S. Kidman, to 300,000 head. It made her the third largest cattle producer in the country, after AA Co and Consolidated Pastoral Co.

Hancock’s comments earlier in this article confirm that some cattle supply to fill the order would have to be serviced via stock purchases from other northern producers.

Beef Central understands that the proposal has already received the backing of a ‘key National party figure’.

While the Rinehart project is targeted specifically at live export trade, fellow WA miner and cattle industry investor, Twiggy Forrest, has taken a ‘process locally’ strategy through his investments in Harvey Beef processing plant in WA and northern cattle assets, rather than ‘offshoring’ the beef processing function.

Questions about live export versus local slaughter sacrificing local/regional employment and value-adding beef products through processing in Australia will inevitably arise, as the Hancock live export project unfolds.

An example of that came yesterday when Queensland agriculture minister Bill Byrne opposed calls for further investigation into the opening of Port Alma south of Rockhampton as a live export port, arguing that it would have significant detrimental impact on his Rockhampton electorate, the home of two of Australia’s largest beef processing plants.

 

This article first appeared on Beef Central on Friday. The Australian newspaper published its version of the same story today, Monday 8 May (click here to view). The Australian’s printed version carried the banner, in red type, ‘Exclusive.’ Other metropolitan newspapers, including the West Australian and the NT News, over the weekend also published items based on Beef Central’s story, giving full acknowledgement to Beef Central as the original source. The Australian newspaper did not.  Editor.  

 

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