US eyes HGP rules in China beef talks

US eyes HGP rules in China beef talks

Beef
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Will China ease HGP-free protocols and allow US beef to flow?

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THE possibility China may ease its restrictions on beef imports from cattle treated with hormone growth promotants is in the spotlight as the next round of high-level trade negotiations with the United States gets underway this month.

The world's two largest economies are attempting to ease the trade tension situation which has seen each apply billions worth of tariffs to the other's goods.

Chinese red meat analysts say beef will be a key topic the US will raise and there is some chance HGP-free protocols could be reconsidered.

Import protocols, including the requirement to be HGP free, have limited the volume of US product that can be supplied directly into China's lucrative high-end chilled beef market since it regained access two years ago.

That chilled market is very valuable to Australia.

Rabobank's senior animal proteins analyst for China Chenjun Pan said if the protocol was reconsidered, there would definitely be a segment of Chinese consumers who would pay a premium for HGP-free beef, however it would likely be accepted quickly by the mass market.

"The Chinese Government would educate consumers around HGP being widely accepted by other countries," she said.

CHINA JOB: Rabobank animal proteins analysts Angus Gildey-Baird and Chenjun Pan.

CHINA JOB: Rabobank animal proteins analysts Angus Gildey-Baird and Chenjun Pan.

Ms Pan has spent the past two weeks meeting with beef producers across Queensland and NSW.

The impact of African Swine Fever, which has seen the Chinese pig herd halved in the past year and has now spread to other South East Asian countries and into Europe and Africa, was a key topic of discussion.

SEE ALSO: Swine fever now on Australia's doorstep

Chinese consumers were largely substituting poultry, however beef demand had definitely risen on the back of the severe meat shortage, she said.

China is now Australia's largest export market for beef, with shipments jumping 65 per cent year-to-July.

However, more importantly is the fact the ASF outbreak had changed the global meat trade pattern as China is the world's largest animal protein importer, Ms Pan and Rabobank's Australia-based senior animal proteins analyst Angus Gidley-Baird said.

"For example, the strength in the trade between South America and China means less is going into Russia - where does Russia then look to source beef," Mr Gidley-Baird said.

"Or if the US and China come to an arrangement this month, more US product going into China may influence what the US then wants in its market.

"Indirect redistribution of product may open other doors for Australia."

Look longer term

It is the underlying fundamental shifts in Chinese demand for beef that Australia should be focusing on, rather than the ASF-related gains which will likely be short-term, according to the two analysts.

"Australia will soon be caught in the situation of having very limited cattle supply," Mr Gidley-Baird said.

"Even if the season doesn't improve, surely we can't kill as many next year as we have this year, which will mean prices go up and it will be difficult to compete against the likes of Argentina and Brazil in the commodity trade in China."

Argentina has lifted its exports to China by 120pc year-on-year.

The real opportunity for Australian beef in China is in the longer term trend of growing demand in high-end channels such hotpot restaurants and steakhouses.

Beef makes up only nine per cent of China's total animal protein consumption, Ms Pan explained.

"Chinese people consume beef when they have more money and want some diversity in their diet - at twice the price of pork, it's considered a premium meat," she said.

As the middle class grows in China, so too is beef consumption in those less-traditional channels.

In these segments, price is no longer the single most important factor driving demand. Taste, nutrition, convenience and Australia's clean, green and natural image are having more pull.

In the hotpot sector, consumption is growing at an annual rate of 16pc, compared to the overall 10pc beef consumption growth.

Alongside those shifting demand trends is the fact there is a structural supply shortage.

"China will never be able to match domestic production with demand. Chinese beef imports have risen by 53pc this year and that gap will continue to grow, past the effects of ASF," Ms Pan said.

Her advice to Australia's beef supply chain is to be strategic and work on long-term relationships.

"It's important to understand what is going on in China and figure out which specific distribution channels you want to work with," she said.

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