SYDNEY/BEIJING (Reuters) — An insect the size of a pen tip is frustrating efforts by Australia to sign a deal to export live cattle to China.
The deal, which is potentially worth billions of dollars, is designed to feed China’s fast-growing appetite for red meat.
Talks have stalled over the presence in the Australian herd of bluetongue disease, a virus spread by midges. While the disease usually has little effect on cattle, it would pose a major threat to China’s 140 million strong sheep flock.
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“I was hoping we could get a deal by now,” said Barnaby Joyce, Australia’s agriculture minister.
“We are on the edge of securing a deal, but unfortunately in trade, you can be on the edge for quite some time.”
Shipping live animals from Australia to China has been discussed for years. Official talks began in February and a team of Chinese scientists is carrying out on-site inspections. However, there is no timetable for an agreement and no guarantee one will be reached.
Live exports could help curb high beef prices in China and open up a new market for Australian farmers. China’s total beef imports are expected to triple to $9 billion by 2025, according to Australian government and United Nations estimates.
Bluetongue, which is common in tropical and subtropical regions, was first detected in Australia 35 years ago and has since spread across the country’s north, carried by the blood-feeding midges.
The live cattle deal is now expected to be delayed until at least 2015, according to officials at regulatory agencies and industry bodies.
Limited land, water and feed is keeping China’s cattle herd from growing in size, despite buoyant demand for meat. Many feedlots and abattoirs are all but empty.
Chinese beef production is expected to ease slightly next year to 6.5 million tonnes, according to the U.S. Department of Agriculture.
China has turned to imports to meet demand. It takes about half of its needs from Australia, buying $778 million worth of red meat in 2013-14, according to Australian government data.
However, with rising demand for Australian meat from the United States, Australian exports to China are set to stall at 160,000 tonnes during 2014-15.
This has kept China’s domestic prices high at around $11.48 per kilogram in retail markets, just below a record $12.03 per kg, say analysts.
“Beef prices will remain at high levels in the short-term,” said Pan Chenjun, a senior analyst at Rabobank.
“China is already allowing more imports, but the international market price is quite high.”
Australia, which has a national herd of some 27 million head, is forecast to export about a million live cattle in 2014-15 worth $823 million, with more than half going to Indonesia.
The price of live cattle is at record highs, but under-used feedlots and abattoirs and cheaper labour in China should allow the Asian country to keep down costs.
China’s regulatory agency, the General Administration of Quality Supervision, Inspection and Quarantine, said scientists are now in Australia, but offered no guarantee a deal with Australia would go ahead.
The delegation is looking at how bluetongue is managed, the Australian agriculture department said.
Analysts said that if a deal is reached, it was likely Australian cattle would be quarantined for several weeks to ensure no sign of bluetongue.
The stakes are high for Australian producers.
“If beef demand in China takes off, there probably isn’t enough cattle in Australia to keep up,” said Willem Rudolf Westra van Holthe, minister for primary industry in Australia’s Northern Territory.
