Beefing it up in China

Beef is big in China but a recent trip with a group of farmers, traders, processors and consultants revealed some fascinating insights and challenged our thinking around the headline statistics and stories about China food production and consumption.

We travelled from north to south to west, examining the entire animal protein food supply chain, with a focus on sheep and cattle.

"The difference between mutton, lamb and goat is lost on most. Each of the 1.4 billion people in 23 provinces have different basic taste preferences."
Mark Bennett, Head of Agribusiness, Australia | ANZ

Here are the key points of focus:


There is nothing more critical or pressing than food safety in China. Australian food has an incredibly strong reputation in this regard and is our single most important attribute as we pursue a critical role in red meat supply.

Safe food consumption in China relies on a distribution system that maintains integrity all the way to the plate. This is true of both locally produced and imported products. Chinese regulators have raised concerns about cold chain infrastructure and logistics - so critical in delivering safe food to the table.

Speaking with specialist international cold chain service providers in China, the numbers tell a story. While around 50 per cent of imported fresh or frozen meat in China is stored in chilled warehouses, only around 15 per cent finds its way into chilled transport – compared with 85 per cent in developed western populations.

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Sourcing fresh Australian red meat on a consistent basis is difficult – a concern expressed by local importers and retailers. We heard of examples where Australian product had to be substituted because of lack of availability.

This opens the opportunity for international competitors as well as an improving and growing domestic supply base. It also opens the door to illegal packaging and grey trade products filling the void.

When you witness obviously repackaged meat (even labelled as 'Australian and NZ lamb'!) you know there is a problem. Recently, it was also revealed red meat frozen for over 10 years had made its way onto the 'fresh' market.

So in China, meat that isn't frozen is fresh. More education and cold chain investment is required consumers who typically think fresh is either killed on the day or managed to point of sale pre-frozen.


Red meat has a great deal of growth potential in China. Beef consumption at 4-6kg per head is very low by western standards. Lamb is lower at around 3kg/head. If China were to consume one more kilo of beef and one more kilo of lamb per capita, which is not out of the question, the market would need to supply an additional 6.5 million head of cattle and 65 million lambs.

With so much at stake, integrated investment and knowledge is critical. Our cattle industry in Australia has incredibly strong attributes but money isn't one of them.

Foreign investment supports long term off takes and creates value. ANZ's Greener Pastures insight report of 2012 identified a need for AUD$1 trillion if our combined industries were to capture the unfolding global demand opportunity.

So how do you start these relationships? Well, with China, you go over there and start talking to people. Too simple? Maybe. But on our trip with ANZ connections in China we originated discussions that uncovered not only a willingness to explore trade and investment opportunity but was a critical first step in awareness.

It was also clear importers were extremely interested to know and understand the grazier whose cattle could support their story and their sales.


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Much commentary has been focussed on the need to shift our agribusiness strategy in Australia from being a low cost commodity supplier to a high value niche marketer. This holds true but in the case of China, safety comes before taste.

There are signs of possibilities within this vast and complex market and we have unfolding success stories like Glenfyne, Argyle Meats and Signature Beef. In an upscale supermarket in Beijing, we see an Australian Wagyu fillet retailing at AUD120, catering to the upper class and expatriates in China, not the emerging middle class that we hear so much about.

Traditional tastes and regional variations still play out strongly in China. We are up against a consumer who often robs core meat products of any kind of redeeming characteristic through the preparation and cooking process. The difference between mutton, lamb and goat is lost on most, and each of the 1.4 billion people in 23 provinces have different basic taste preferences.


Live cattle sales from Australia to China have been catapulted into the frame. Before our tour I had reservations about China being a significant live cattle market for us in the short term.

But speaking to industry in China, it is rapidly organising itself and will invest strategically to make this big and make it happen. The concept of taking one million live cattle from Australia in any given year is right in their sights and they have an acute awareness of the issues and obstacles that will need to be overcome.

And what of the balance between chilled meat sales to China and Asia and live cattle trade? China has a domestic motivation to create industry prosperity and not just be a one dimensional food importer.

It is fighting back against food safety concerns emanating from a local supply chain dominated by local slaughterhouses of old equipment and outdated processes. Clean, modern, efficient plants that comply with the highest global standards of food safety and animal care is their charter.

The demands of a growing and increasingly wealthy population leave room for Australia to supply cattle as well as branded chilled product to an open market that demands choice.


Don't underestimate the value of ChAFTA. We naturally focus on the short term price outcomes needed by our industry, especially farmers, but many individual commodity agreements have a phased tariff reduction over many years.

Those we spoke to in China see ChAFTA as a meaningful and strategic avenue to trade and investment opportunity. Short of global seasonal production swings, we are not going to see an overnight fundamental shift in soft commodity prices that answers the margin or profit lament of Australian producers.

Time, patience, money, passion, connection and trusted relationships are needed in order to successfully tackle the China market. But wow, what a big and exciting market it is.

Our cattle industry in particular has so much ahead of it and I think there will be massive implications to our grains industry as it ties so closely to animal production both in Australia and in Asia. That's another topic on its own.

China is a market that's been talked about for a long time but it's now a giant making an enormous impact that has not yet been fully felt.

Mark Bennett is Head of Agribusiness, Australia at ANZ.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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