China has grown into a major market for both beef and sheepmeat over the last decade. From very minor tonnages 15 years ago it has become a major player in Australia's export market strategy becoming what was our third largest market for beef in 2021 at 148,356 tonnes.
If you add exports to China of lamb (62,881 tonnes) and mutton (57,343 tonnes) together for 2021, it is also our largest market for sheepmeat as well.
Relations of recent times with China have not always been easy and much of the geopolitics underpinning that sensitivity has been outside the meat industry's immediate ability to influence.
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Australia currently has 47 meat processing plants accredited for China but 10 of those plants remain suspended, some for a couple of years now. Another dozen or more plants remain on the waiting list to be accredited for China.
Despite the potential for chilled beef in China and Australia's impeccable track record with the product in other markets, only eight of potentially three times that many plants remain accredited for chilled meat to China (seven beef and one sheepmeat).
The recent change in Government in Australia has appeared to have a positive effect on the political landscape between the two countries.
The conditions for market access are the sovereign right of any country to establish.
At some point in the future, however, any improvement in relations can hopefully be reflected in a more proactive review of the plants currently suspended or awaiting accreditation that is consistent with the spirit of the Free Trade Agreement we both signed in 2015.
Changed requirements in May for sheep runners to China for Australian packers seemingly went through without incident.
According to the United Nation's OECD - FAO, Agricultural Outlook 2022 to 2031, while global beef production will increase to 76 million tonnes over the next 10 years, per capita consumption is forecast to fall by 2pc.
Asia and China are forecast to be the exception with per capita beef consumption in China forecast to rise by 10pc over the next 10 years, having risen 50pc in the last decade. It will become the world's second largest consumer of beef in absolute terms.
Market analyst Aginfo reports that China imported around 230,000 tonnes of beef from all sources in the month of June this year alone and a staggering 1.17 million tonnes of beef for the six months to June.
Australia cannot afford not to be part of that growth.
Despite current production limitations in Australia, the Chinese plant suspensions, plus logistics issues in China, Australia still exported 73,078 tonnes of beef to the market for the first six months of this year, making China our second largest beef market after Japan for the period, exceeding exports to Korea and the US as well as shipments to China for the same period last year.
Australia shipped 300,132 tonnes of beef to China in 2019, the largest ever single year beef shipment by Australia to that market. That represented around 24.4pc of total beef exports that year.
Exports for the first six months of 2022, while much lower in volume, are still 18.4pc of total beef exports, well up on last year.
Despite the challenges, China's position as a major beef market for Australia continues.
The pandemic has affected all markets. China's zero COVID policy has had a substantial impact on business because of the lockdowns put in place wherever the virus has surfaced but especially in Shanghai where congestion at the world's largest container port created a logistical challenge for the integrated global network of container movements it is part of.
At a more micro level we have seen the suspension of a number of foreign meat processing plants when they have reported COVID outbreaks in staff, including in Australia.
Something more unique to China has been the testing of imported fresh and frozen foods for the virus including meat shipments, a process that began in 2020.
China has linked previous COVID outbreaks among dock workers with its detection on frozen product. Where China's General Administration of Customs has found traces of the virus on external packaging, plants have been suspended for at least a week or longer.
This has been just another element of uncertainty for exporters with Brazil a particular focus. Reports this week from China suggest that the GACC is beginning to cut back COVID testing on a number of goods to reduce the enormous cost involved as well as the overall impact on supply chains. Where positives do occur now, plants won't be suspended.
Another recent development was the announcement that Uruguay and China will begin negotiations on a Free Trade Agreement.
Uruguay's number one export is beef and they have become the consistent quality end of the South American beef industry. It is significant that Uruguay looks like it will go it alone this time on an FTA rather than with its Mercusor partners (Brazil, Argentina and Paraguay).
This should avoid many of the phytosanitary, environmental and political challenges that have arisen when the other partners have been included.
China is currently Uruguay's largest market for beef but without an FTA they would be paying the base rate of import tariff of around 12pc on boneless and up to 25pc on some bone-in products.
This is against the 2.4pc Australia is paying on boneless beef as a result of its FTA with China, a tariff that moves to zero by 1 January, 2024.
If the same timetable applies to Uruguay, an FTA with China would see them also at zero in nine or 10 years. China is a HGP-free beef market and greater access to China for Uruguay would see less competition with Australia in the already over subscribed HGP-free EU grainfed beef quota.
What other new FTA's are in the pipeline with China that might compete away Australia's current tariff advantage remains to be seen.
In the last decade China has become a strategically important part of every major beef exporting country's global market plans.
The growth potential over the next decade is clear but the politics will be more complex and the competition more intense and across a broader range of product qualities than was the case when the US, Japanese or Korean beef markets were at the same stage of development.
Closer to home, fears around foot and mouth disease, inflamed by sensationalist media, have sensitised every element of the supply chain this week.
Market analyst Aginfo reports that weekly national cattle slaughter levels have continued in a narrow band of 95,000 to 98,000 head with Queensland cow slaughter at just 34pc, reflecting the continuing downward trend over the last few years.
The downward correction in US lean beef prices in response to abundant US domestic beef supplies has pressured grid prices in Australia with the recent rise in the US dollar only adding to negative implied margins for processors.
Urner Barry "Yellow Sheet" pricesfor US imported blended cow were at 265 to 268 US dollars per pound carcass weight last week on an imported US market continuing to edge lower.