Beef processors brace for China retaliation over diplomat spat

Shan Goodwin
By Shan Goodwin
Updated December 9 2021 - 6:03am, first published 5:46am
Beef processors brace for China retaliation

BEEF exporters are bracing for blowback over Australia's diplomatic boycott of the Winter Olympics to be hosted by China next year, with fears of more suspensions of processing plants supplying the valuable market.

Seven processing plants, located across Queensland, NSW and Victoria, are locked out of the Chinese market, with little doubt the ongoing suspensions are linked to geopolitical tensions.

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Industry insiders have drawn a direct link to the latest suspension, that of Australian Country Choice's Cannon Hill facility in Brisbane in October, with comments that were made only a week prior by former prime minister Tony Abbott in Taiwan around Beijing being a bully.

The announcement this week that Australia would join the United States in not sending officials to the Beijing Winter Olympics in protest of human rights abuses is expected to have ripple effects on Australian agriculture.

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While China has cited technical issues such as labelling and residue detection for slapping the bans on Australian plants, those type of issues are generally rectified quickly.

Those suspended, some of them dating back to last year, have put in place corrective programs which have been audited by Australian authorities and the corresponding report supplied to China but the process of reopening access has stalled at that point.

The Chinese Embassy in Canberra issued a statement saying the decision to not send dignitaries runs counter to Australia's public claims to seek improved China-Australia relations.

Beef exporters have continually urged both governments not to allow trade to be collateral damage during relationship issues.

Processor squeeze

Suspensions from the Chinese market, the largest importer of meat in the world, is just one of the hefty challenges facing Australia's beef processing sector heading into 2022.

Profit margins have been heavily in negative territory and the latest Agri Commodity Report from big bank ANZ says with the growth in cattle prices exceeding the rise in retail beef prices, margins for some meat processors could tighten considerably in coming months.

"On their own, the high cattle prices have continued to see the price of beef on retail shelves climb at a steady rate," said Ian Hanrahan, ANZ's agribusiness boss.

"However, when the ratio of beef retail prices to the Eastern Young Cattle Indicator is taken into account, it is clear that the margins between the two are at their tightest point for at least twenty years."

ANZ, along with other analysts, are forecasting more reductions in operating capacity next year.

Some believe further rationalisation is inevitable.

"For those processors with a diverse export customer base, the strong global demand for grain-fed beef programs has provided some buffer in recent times," Mr Hanrahan said.

"But for those in tighter positions, given that retail beef prices can only rise so far before it markedly impacts demand, it makes the need for cattle prices to fall even more imperative."

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Shan Goodwin

Shan Goodwin

National Agriculture Writer - Beef

Shan Goodwin steers ACM’s national coverage of the beef industry. Shan has worked as a journalist for 30 years, the majority of that with agricultural publications. She spent many years as The Land’s North Coast reporter and has visited beef properties and stations throughout the country and overseas. She treats all breeds equally.

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