China ripe with opportunity for premiums

It has been nearly a decade since negotiations began and we've heard plenty about the benefits of getting into China from New Zealand's booming dairy trade.

Our dairy trade for the previous financial year almost doubled to $440 million without an FTA, so the potential is massive and a good deal for dairy would help our processing sector as well.

However, with China investing in its own dairy herd, including importing as many as 79,000 head from Australia last year, is it going to risk undermining that investment by allowing in more Australian products on lower tariffs?

And if it does, what could be the trade-off? Relaxed policies around Chinese investment on our shores?

With comparatively low tariffs on Chinese goods already, we've entered negotiations with one less bargaining chip than many other countries.

Agriculture should benefit from a signed deal, but there will be trade-offs along the way.

With the Black Sea region now supplying much of our traditional Middle Eastern grain markets, it's important we increase the volumes going into Asia.

However, gains in other commodities, like the opening of gas exports into China, will increase our processing costs.

So cost of production will remain a ball and chain on our competitiveness.

Therefore, once a deal is signed we need to have relationships and potential supply chains established.

We also need a FTA which allows us to do more than just pour bulk commodities into the hull of a ship.

We need to sell our products at a price premium.

Northern Australian beef, for example, could be sold as a premium, healthy grass-fed product, even if its main market was Chinese hot pots.

In fact, branded beef could go a long way to reducing the price pressure the cattle market has experienced throughout the past couple years.

And given our size - or lack thereof compared with many other countries - as a producer of most products, branding and well-managed supply chain relationships will be key to turning a dollar in China.

But without a good deal, progress will be slow.