Investing in China

China, the food bowl of Asia and the world’s fastest-growing economy, offers valuable trade opportunities for our beef and dairy sectors. We outline some of those opportunities, from westernisation of the Chinese palate to animal husbandry.

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With a population of more than 1.3 billion and double digit trade growth, China is one of Australia’s most important agribusiness trading partners.

Eight NAB Agribusiness bankers have completed two six-week tours of China, visiting grain, dairy, meat, aquaculture, wine, sugar and horticulture businesses to identify trade opportunities for customers, as well as meeting with rural commodity associations and government departments to firm up contacts in the supply chain.

“China was recently announced as the world’s second largest economy, behind the US, and its share of Australian rural exports has risen from 6 to 10 percent in the past decade,” says delegate participant, NAB’s General Manager for Agribusiness, Khan Horne.

This growth, along with changing lifestyles in China, signal greater export opportunities for Australia’s beef and dairy producers.

Beef trends in China

Gary King, NAB Director of Corporate Agribusiness Queensland, suggests the Australian beef industry can sharpen its focus on China’s export opportunities by tapping into the following trends:

  • Lifestyle shifts. Urban disposable incomes are rising. The Chinese traditionally consume more pork, poultry and sheep meat than beef, but market share for beef is stable in a rapidly expanding market for meat protein.
  • The Chinese palate. Research the Chinese preferred cuts of meat and preference for marbling.
  • Animal husbandry. China is keen to improve productive efficiency of its herd and this opens up opportunities in animal husbandry – supplementary feeding, genetics and nutritional science are seen by the Chinese as key factors in improving the quality and appeal of domestically produced beef.
  • Breed demand. Main beef breeds in China are Simmental, Angus, Charolais, Limousin and Wagyu. Cattle killed are mainly bullocks no less than 24 months old weighing at least 500kg.

Dairy trends in China

Australian exports of dairy products to China grew from $2 million in 1993 to $118 million in 2002. And the rise is continuing. Chinese demand for dairy imports will increase by about 5 percent annually, predicts the Australian Dairy Industry.

Opportunities abound since China is one of the fastest growing markets for dairy in the world, adds Angela Biviano, NAB Director of Corporate Agribusiness Southern.

Here are trends that dairy producers should be aware of:

  • Milk powder consumption in China averages around 5kg per person annually (milk solids) but the Dairy Association of China sees potential for it to rise to 27kg in the next decade.
  • Milk and dairy products aren’t traditional foods in China. In the past decade, however, the Chinese diet has become more westernised as wealth levels have risen. The result is that dairy, along with red meat consumption, particularly for the urban population, has increased remarkably.
  • Demand from China is already the key driver of global prices for milk powder. It’s the world’s largest buyer of milk powder to satisfy the growing demand for dairy products.
  • Chinese companies are working hard to increase domestic production, with ongoing activity in importing live dairy cattle, genetics and expertise in processing from countries such as Australia, New Zealand and Canada.
  • Superior genetics, better quality feed and a greater understanding of animal husbandry means dairies in Australia achieve an average of 5,700 litres per cow annually, compared with 4,500 litres for Chinese producers.
  • While negotiations for the Australia-China Free Trade Agreement have been underway since May 2005, any easing in current tariffs will benefit dairy exports. Exporters who are aware of the opportunities, and can build relationships in China now, are tipped to benefit as soon as an agreement is reached, in terms of premium returns and duty savings.

These trends will shape future industry growth. After all, Australia’s farm gate price is influenced so strongly by export returns that an increase in export demand will benefit the sector as a whole.

For businesses exploring Asian market opportunities, find more information at further information about NAB’s banking operations in Asia can be found at nabasia.com.