(Corrects labour cost comparison par 3 to a fifth of Australian
* Australia keen to sell live cattle to China
* Chinese demand for beef jumped 40 pct in past year
* Chinese delegation to Australia discussed biosecurity
* Australia live cattle exports steadily growing
By Colin Packham and Dominique Patton
SYDNEY/BEIJING, April 14 Hot on the back of
winning lower tariffs for beef exports from its largest buyer
Japan, Australia is setting its sights on winning another major
prize for its beef industry by persuading China to open its
market to live cattle sales.
China's growing middle class seems to have an insatiable
hunger for beef, but with limited domestic stock, beef imports
are hitting record levels, jumping 40 percent in the past year.
Importing live cattle would not only be a windfall for
outback ranchers, but make economic sense for China, with
abattoirs there running at only 30 percent of capacity and
labour costs around a fifth of wages in Australia, say beef
Cattle baron Graeme Acton, Australia's largest rancher and
already a major beef exporter to Japan, South Korea and
Southeast Asia, has his sights on Asia's expanding market.
"Live cattle would be a highly lucrative market for us...I
think it would complement the boxed beef market, which has grown
into a massive market for us in just the last year," said Acton,
who has around 4 million acres (1.62 million hectares) of
grazing land in Queensland state and about 180,000 head of
China and Australia are keen to finally commence live cattle
trading, having seen a 1998 deal fail because of regulatory
issues, say Australian officials.
Chinese officials visited Australia in March to discuss live
cattle trade issues, and with Australian Prime Minister Tony
Abbott in Beijing last week for free trade deal talks, hopes of
one day mustering cattle for China are rising.
Abbott secured a free trade deal with Japan last week, which
included a reduction in Japanese beef tariffs.
The lucrative prospects of live cattle to China have even
attracted Australian mining magnate Andrew 'Twiggy' Forrest, a
major iron ore supplier to China.
Forrest, born into a family of cattle ranchers and spending
his early years as a "jackaroo" or ranch hand, has partnered
with pastoral firm Elders to promote the trade.
Forrest has increased his cattle properties in Western
Australia, site of his iron ore mines, to more than 7,000 square
km (4349.6 square miles), about a third of the size of Israel.
CATTLE TRAIL TO CHINA
Australia is the world's third-largest beef supplier, after
the United States and India, and has been exporting live cattle
to neighbouring Indonesia since the early 1990s.
Its drought-resistant Brahman cattle, grazing in the sparse
outback in the north of Australia, is the preferred beef for
Indonesia's mostly Muslim population, who slaughter cows
according to Islamic practice to produce halal meat.
But the dream of cracking the Chinese live trade market has
been illusive. Biosecurity concerns, raised by the Chinese
delegation in March, are seen as one of the stumbling blocks.
"The Chinese technical delegation were here to discuss some
of the health concerns they have...and hopefully we will be able
to find a resolution where we can export cattle to China," said
Alison Penfold, chief executive of the industry group,
Australian Live Export Council.
A deal with China would reduce Australia's dependence on
Indonesia. The trade has suffered disruptions over animal
cruelty concerns and import curbs by Jakarta as its strives for
It would also benefit Australia's cattle ranchers in the
Northern Territory and Western Australia, with the Territory
capital Darwin already a live cattle export hub to Asia.
It would also allow access to underutilised feedlots and
abattoirs in China, reducing costs for both ranchers, who have
to transport cattle vast distances to reach abattoirs, and
buyers in China.
"There is a clear benefit for the Chinese to use excess
capacity. Their labour costs are still significantly lower in
the processing sector than Australia," said Craig Aldous,
China-based general manager at Elders Fine Foods, who estimated
costs at around at one-fifth of Australian wages.
Liu Chunsheng, sales manager at Fuhua Meat, a beef processor
on the outskirts of Beijing, said the firm is currently only
using about 40 percent of its capacity, which is still better
than most of the industry running as low 30 percent as demand
outstrips stagnant domestic production.
Chinese beef imports this year could hit 550,000 tonnes, up
nearly 40 percent from last year, the U.S. Department of
Agriculture attache in Beijing has forecast.
The Organisation for Economic Co-operation and Development
expects beef consumption to become the fastest growing for meat
in China, increasing 7 percent per year over the next eight
years to an annual consumption of around 850,000 tonnes.
The Australian Bureau of Agriculture and Resource Economics
and Sciences (ABARES) expects live cattle exports to hit a
five-year high of 600,000 head in the 2014/15 season, worth
A$600 million ($565 million) to the industry.
Driven mainly by Indonesian demand, ABARES expects live
cattle exports to grow steadily, peaking at 875,000 in 2018/19.
Any live cattle deal with China would shake up Australia's
exports, but with Australia's largest cattle producing state
Queensland in drought, and suffering record stock culls, the
full implications would not be until ranchers re-stocked herds.
"Once the drought does break and supplies tighten, the
export market is going to be very competitive. It will be
interesting to see who is going to pay the most for Australian
beef. Is China going to pay more than the U.S. or Japan?" said
Matt Costello, Rabobank animal proteins analyst.
($1 = 1.0620 Australian Dollars)
(Editing by Michael Perry)