Coal orders from China: Will beef plant suspensions soon be lifted?

Given China's need for beef is arguably as strong as its need for coal, as consumption of both goes through the roof with the easing of Covid restrictions, optimistic commentators believe the cattle industry is better placed than the likes of wine and barley to see the next round of relationship thawing benefits.

Eight red meat processing plants in Australia remain temporarily suspended from supplying China for reasons ranging from labelling and residue accusations to Covid-related issues. Two have not continued with attempts to regain access.

Experts say if reversed, the lifting of suspensions would likely happen in a similar manner to the way they came along - without any official announcements or acknowledgement and with limited fanfare.

China and Australia's relations has been strained for at least five years. Prominent Australian think tank The Lowy Institute lists China's grievances with Australia as including the decision to exclude Huawei and ZTE from the construction of Australian 5G networks, cancelling the Victorian state government's Belt and Road Initiative agreement with China, and calling for an inquiry into the origins of Covid-19.

Significant efforts have been made by Australia's new government to improve relations and the combination of that, and the change in Covid lockdown policy in China which will see demand for commodities skyrocket, is what is prompting talk now of trade changes.

Aside from coal and beef, Australian exports of barley, cotton, wine, lobsters and grapes have all been affected.

Australian Meat Industry Council boss Patrick Hutchinson said Australian beef exporters were in a good position should China reach out, with everything set up and ready to go in terms of information.

Plans were in place for 'all eventuations' in the China trade, he said.

Business with China was valuable to the red meat industry and any improvement in opportunity there would be a fantastic outcome on top of the potential emerging in other international markets this year, including grinding product to the United States and sheepmeat to India with the signing of a new deal, he said.

Even against a backdrop of economic downturn due to Covid lockdowns last year, China imported record levels of global beef and was the third largest market for Australia. It took 18.5 per cent of the Australian beef export trade, or 158,086 tonnes shipping weight.

Many factors played into the trade last year over and above the Australian facilities that were not able to take part in the Chinese market, including low supply of cattle and record prices.

Global Agritrends chief executive officer Brett Stuart, described the opportunity for both Australian and United States grainfed beef in China this year as 'phenomenal'.

"Over the past three to five years, demand for high quality beef has exploded in China," he said.

"The Chinese are buying every pound of this beef they can find in the world right now.

"The average retail price of beef in China is up 3pc over a year ago. We, in the US, are enormously optimistic for China - we predict in 2023 Hong Kong will become the biggest market for US beef and probably stay in the number one spot for the rest of my life."

Mr Stuart said China's wealthiest 10pc were pursuing grainfed beef. That's 140m people - more than the entire population of Japan, he said.

"I would suggest this demographic might be more recession proof than the lower classes eating Brazilian beef," he said.

He said in particular, the opportunity for beef brands in China was strong.

Bryce Camm, chief executive officer of Camm Agriculture Group in Queensland and chairman of Beef Australia, said Australia's beef industry collectively had done a great job of not being alarmist about trade issues with China.

That had been crucial, he said.

"While we hope the government-to-government situation will improve, we know there are many businesses here and within China that share great and beneficial relationships," he said.

"While China is not where it was for us in terms of beef exports three or four years ago, it is still in our top five."

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The Lowy Institute says China's campaign against Australia is considered to be its most comprehensive set of punitive trade measures imposed on any country.

In a paper published last month by the institute, Susannah Patton said the overall economic impact of China's campaign of economic coercion against Australia had in fact been relatively limited.

Prime Minister Anthony Albanese and his foreign minister, Penny Wong, had been measured in their language on China and did seek to lower tensions by limiting public criticism or commentary, she said.

The paper also makes the point Australia did not rescind or resile from any of the decisions that China had grievances with to secure improved relations.

The diversity of Australian red meat markets - we ship to more than 100 destinations - has been highlighted numerous times in discussions on the effect of plants being suspended from China.

Whether Australian exporters, not just in beef but other commodities, choose to focus on other markets going forward remains to be seen.