SYDNEY, Australia (Reuters) — Australia will export up to one million head of cattle a year to China once a long-awaited deal is signed.
The agreement, which is expected to be signed shortly, would be worth around $970 million a year and help meet a growing appetite for red meat.
Australian agriculture minister Barnaby Joyce said negotiations to finally reach an agreement after a decade of on again-off again discussions were “progressing well” and close to being announced jointly by the two countries.
The latest talks over shipping live cattle from Australia to China resumed in February. Australia’s trade minister is currently in China, where the cattle deal is expected to get a final sign-off.
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“It’s a million cattle, worth AUS$1 billion,” said Australian cabinet minister Christopher Pyne.
“It’s a great breakthrough.”
China is Australia’s largest trading partner, with two-way trade of around $150 billion last year.
The two countries are in the final stages of reaching a free trade agreement that prime minister Tony Abbott wants signed by the end of the year.
Joyce said talks over live cattle exports were being conducted outside of the free trade talks and at this late stage were focused on technical aspects of breaking into the Chinese market, such as biosecurity requirements.
Nevertheless, greater access for Australian agricultural goods has been a key sticking point in Abbott’s push for a free trade agreement.
“It’s a very big deal,” said ANZ senior agricultural economist Paul Deane.
“The far northern cattle industry is very dependent on live cattle and the trouble is, it’s very reliant on Indonesia,” making it a far riskier investment.
Australian live cattle exports to Indonesia collapsed in 2011 after footage emerged of animals being mistreated in Indonesian abattoirs.
Talks over live cattle exports to China have in the past been hit by a series of setbacks, such as allegations of inhumane treatment of cattle exported to Indonesia and concerns over fly-born disease in Australian herds.
The presence of bluetongue disease in Australian cattle has held up live export talks. The disease typically has little effect on cattle, but it would pose a threat to China’s 140 million sheep.
Meat demand in China is buoyant, but limited land, water and feed is keeping the country’s cattle herd from growing in size. Many feedlots and abattoirs are all but empty.
China already imports large quantities of Australian red meat, buying $769 million worth in 2013-14, according to Australian government data.
“There’s no question that the fundamentals for beef in China are positive, regardless of whether it’s live cattle or boxed beef,” Deane said.
“Beef prices generally would be our standout (pick) over the next 12 to 18 months over all the ag commodities we look at.”
Investors have been positioning for a breakthrough in the Australia-China cattle talks.
Andrew Forrest, who has made billions of dollars mining iron ore near the cattle ranch where he grew up in far west Australia, this year paid $40 million for a beef processing and exporting company already gearing up for the China market.
After visiting a supermarket in China and inspecting Australian beef on offer, Forrest said he hoped to build a beef success story to rival last decade’s boom in mining.
Another iron ore magnate, Gina Rinehart, bought a 50 percent stake in two large cattle farms in June. Rinehart’s private company, Hancock Prospecting, paid approximately $40 million for the stake.
However, Australia may struggle to meet a surge in demand for live cattle exports. Queensland state, which is home to about half the national herd, has been plagued by drought, forcing farmers to slaughter animals at a record rate this year.
And while bluetongue-free cattle from southern Australia will be allowed access all year round, cattle from northern Australia will be restricted to the few months of the year when the virus is less prevalent.
