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China’s live export infrastructure development in overdrive

by Jon Condon, 18 May 2017
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NAB china 2017 John Manchee feedlot

John Manchee, Manchee Agriculture, Narrabri, NSW, inspects a feed ration at Kerchin Group’s 10,000 head feedlot in China yesterday

 

 

INFRASTRUCTURE development is happening at breakneck pace in China, as the country readies itself for an anticipated start to commercially-significant volumes of live cattle exports out of Australia.

That is the distinct impression being left with a primary producer study tour visiting China this week, organised by NAB Agribusiness.

The group of 24 Australian primary producers, including a strong beef contingent, yesterday made one of the first official visits to a new quarantine facility being built at Zhoufhan Island near Ningbo, south of Shanghai by New Hope Group – recently aligned with Gina Rinehart’s ambitious new Hancock Pastoral live export venture (see Beef Central’s earlier report).

One of the beef producers on the tour is John Manchee, from Manchee Agriculture near Narrabri in NSW. Beef Central managed to track John down for a talk yesterday afternoon, while in transit between tour destinations. He said there was a clear sense of anticipation among Chinese contacts over the looming prospect of access to large volumes of cattle from Australia.

“New Hope Group and its partners are determined to complete this extensive new quarantine facility as quickly as they can, and plan to have it up and running by early next year,” he said.

“They told us they want to have cattle imported by 2018.”

“It’s a massive expansion, driven by huge funding to get this going between Australia and China. They are very focussed on that relationship, and their long-term view is very positive. The group plans to spend something like $2 billion on infrastructure development over the next 20 years, mostly on processing infrastructure and livestock holding facilities, rather than feedlots.”

The tour is providing an interesting progress ‘yardstick’ for Mr Manchee, who visited China 15 years ago as part of a Shorthorn Society  delegation, when the country’s beef industry and imported beef demand was in its infancy.

He’s noticed massive changes since his previous visit in 2002.

The tour group also yesterday inspected a processing facility operated by China’s WH Foods, which left a clear impression about just how far processing infrastructure has come in the country.

WH Foods is a subsidiary of the Chinese Shuanghui Group, which bought the massive US pork processing business, Smithfield Foods in 2014. The WH group is now the world’s largest pork producer, and has poured enormous resources into its meat processing facilities.

“The standard of their processing plants, if this is any indication, have just improved out of sight,” Mr Manchee said. “They have introduced a lot of new technology from Germany and elsewhere overseas, and radically lifted the hygiene and efficiency standards of the plants.”

“It was quite clear that the WH Foods company has plans to become the number one beef producer in the world, also, if it can do so. They want to double the kill at the facility we saw. The demand for beef seems to be huge, everywhere we went.”

Other visits made by the group yesterday included Kerchin Group, a lotfeeding business with around 10,000 domestic Chinese-bred cattle on feed, which Mr Manchee also visited on his previous 2002 trip.

“It’s quite amazing how they have transformed the quality of their cattle in that period time,” he told Beef Central, from the tour bus.

“The cattle we saw yesterday are fed from 6-10 months of age on a corn-based ration. The cattle themselves look pretty good, by Australian standards – well muscled but quite lean at slaughter. Certainly far superior to what I saw 15 years ago – I was surprised.”

Click on video below to see John Manchee’s impressions of the cattle seen at Kerchin Group:

But while advances are obviously being made in the standard of Chinese domestic cattle, it was evident everywhere that the tour group has gone in the past three days that demand for Australian live cattle is ‘universal’.

“Every business we’ve visited wanted to get started and grow as quickly as it could,” Mr Manchee said. “Beef is certainly the in-demand commodity at the moment in China.”

Asked whether there were signs that the Chinese were looking at sources of live export cattle other than Australia, based on price, he said he got the feeling that the Chinese contacts the group had spoken to were ‘very happy’ with the relationship with Australia, as a preferred supplier.

“The image of the Australian product, particularly its clean, green status and high degree of traceability, is helping driving the demand for our beef. It’s clearly our biggest selling point, based on what we’ve been told.”

He said there was no real sign of any breed or other preference for type of beef cattle out of Australia.

“It’s all just about supply – a protein play, at this stage,” he said. “But they are talking quality and health benefits, so those quality distinctions (such as breed or marbling) may come, over time. Certainly clean, green and antibiotic/HGP free seems to be right on their radar. There’s a whole new generation of young Chinese coming through who are thinking that way.”

Supply was obviously going to be the big issue for Australia, Mr Manchee said. “Australia just does not currently have enough livestock to deliver what the Chinese hope to achieve.”

Asked whether the bluetongue issue as an obstacle to live cattle access out of northern Australia had arisen in discussions, he said it had, a little.

“We got the impression that the Chinese will do whatever it takes to make the trade happen, once they have made their mind up,” he said.

Relationships matter in an ever-changing China

The Chinese market is dynamic, and the more Australian agribusinesses understand how it is changing, the better they can take advantage of the opportunities it has to offer.

That’s the advice from NAB Agribusiness general manager Khan Horne, a regular visitor to China who is leading this week’s agribusiness client study tour.

“Australian agribusinesses are always looking for new markets and opportunities, and understanding what the market wants and seeing it first-hand, is critical to getting the right outcomes,” Mr Horne said.

“That applies particularly in China. The Chinese place a strong focus on face-to-face meetings to build business relationships, and it’s great that more Australian agribusinesses are travelling to all parts of the country.”

“Gaining an understanding of how the supply chain works, and the customer’s role in it, can also provide insights on how to value-add, and suppliers can then develop an appropriate business strategy in response,” Mr Horne said.

While there were enormous opportunities for Australian agribusiness following the signing of the China-Australia Free Trade Agreement, there was also fierce competition for those markets.

“There’s also a fluid regulatory and commercial environment that needs to be skilfully navigated. The best way to do that is to get assistance from organisations that have a base in China, such as Austrade, as they can provide knowledge, connections, strategies and insights,” he suggested.

Mr Horne warned that despite the rapid and enormous changes happening in China, it’s not a place where business relationships progress quickly.

“Like many agricultural investments, you need a long-term strategy to do business in China, as well as a degree of cultural sensitivity. Be prepared to visit several times to meet the right people, cultivate relationships, and lay the groundwork for potential investment opportunities or contracts for the future.”

 

Scroll through more images from the tour below



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Reader's Comments


Comment
  • Val Dyer May 18, 2017

    Yes, ‘ direct consignment to works’ from Australia to China (via Chinese quarantine and modern processing facilities) makes sense, given that the Chinese prefer their beef to be ‘finished’ in Australia, not lotfed in China.

  • Jack Randles May 19, 2017

    It is notable that the cattle featured in the feedlot video were Bos Taurus, the question is from what source? Australia? North America(Hawiea)?
    If the cattle export quantities from Australia do eventuate will this result in a local beef supply shortage situation similar to the gas exports? There is already regulation available that stipulates that the local Australian market must be supplied in preference to exports.

    Thanks for your comment, Jack. It’s reasonably evident from John Manchee’s comments that these are domestically-bred Chinese cattle in the picture, likely bred or descended from earlier semen imports of superior genetics from Australia and elsewhere. Editor

  • Dick Morgan May 21, 2017

    It has been reported that Gina Rinehart aims to ship 800,000 head of cattle to China in the next few years. “Twiggy” Forrest has reportedly said ‘this is a bad idea. It denies jobs and value to Australia’. I am inclined to agree with Mr Forrest.

    Now, I’ve no doubt the Australian and Chinese partners in this venture have very good reasons to do what they are planning. The Chinese market for beef is opening up in a way that was never imagined a few years ago. Live cattle will supply some of that market. But so will frozen and chilled boxed beef produced here in Australia.

    What we need is more killing facilities in the northern part of Australia. More state-of-the-art abattoirs, boning rooms, chillers, freezers, feed-lots etc. More infrastructure – roads, rail, bridges, dams, ports. And even airports. The whole lot!. Whether it is foreign capital or Australian money that is used doesn’t matter. As long as more than 50% ownership stays in Australian hands.

    The potential for increased beef exports to China is enormous. I liken it to the growth of beef exports to the USA fifty years ago. In 1960 when the first shipments of lean boneless cow beef took off to the USA the tonnage steadily grew to 400,000 tons by the seventies. So much so that the USA imposed a quota system on our exporters. They said the volume of Australian cowbeef was hurting their beef producers!

    There will always be a need for some live cattle cattle shipments to satisfy certain market requirements – particularly in Indonesia where Halal slaughter and the lack of domestic refrigeration will apply.

    But in China the growing purchasing power of the middle class consumer and the increasing preference for a western style diet is creating a strong demand for alternative food supplies.

    A vertically integrated system ‘from paddock to plate’ with value added at every stage of the supply chain is what is wanted in Australia. Andrew Forrest’s purchase of the Harvey meat works in WA is an example of what I am talking about.

    I hope Gina (and the new CEO of S Kidman & Co) reads this and takes note

  • Anthony White May 21, 2017

    Last time I was in China there where thousands of new appartments nobody lived in.. Be careful if you are drawing a conclusion on this story!!

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