Key Takeaways
- China’s 55% tariff on beef exceeding the 205,000-tonne quota is likely to heavily impact Australian cattle farmers producing Wagyu and Angus beef.
- The tariff is expected to lead to a significant decrease in Australian beef exports to China, with high-end products being the most affected.
- Australian businesses are looking for alternative markets to export their products, but this may come at a lower price, affecting the profitability of farmers and processors.
- The Chinese beef industry has been declining, and the new tariff is seen as another challenge in the country’s agrifood and geopolitical aspirations.
- The global beef market is expected to be flooded with products from other major exporters, leading to a potential price drop in the second half of the year.
Introduction to the Tariff
The introduction of China’s 55% tariff on beef exceeding the 205,000-tonne quota is set to have a significant impact on Australian cattle farmers producing Wagyu and Angus beef. The tariff, which came into effect on January 1, is expected to lead to a substantial decrease in Australian beef exports to China. NSW Hunter Valley Angus producer Robert Mackenzie has expressed concerns about the tariff, stating that it would be detrimental to his industry. With his company exporting 26 tonnes of produce to China every month, Mackenzie is worried that the big processors will flood the market with lower-quality products, leaving a big hole in the Chinese market for high-end products.
Impact on Australian Businesses
The tariff is expected to have a significant impact on Australian businesses, particularly those that rely heavily on exports to China. Casino Food Company CEO Simon Stahl has stated that his company will be significantly affected by the tariffs, with around 20-25% of their business, valued at around $100m, being impacted. Stahl has also noted that diverting exports to other markets will come at a price for producers, with the potential for lower prices and reduced profitability. Meanwhile, Nick Togias, owner of Razorback Ranch in NSW, has reported a slowdown in the live export trade of full-blood Wagyu heifers to China over the past two years.
Global Market Implications
The introduction of the tariff is expected to have significant implications for the global beef market. Meat analyst Simon Quilty, from Global AgriTrends, has noted that Australian prices could drop in the second half of the year as other major beef exporters look for new markets. This is due to the fact that around 600,000 tonnes of beef globally will need to find a new home, leading to increased competition and potentially lower prices. Garry Edwards, chair of Cattle Australia, has also noted that while lower-cost products may find a home in other markets, the more expensive cuts will be harder to shift.
Chinese Beef Industry
The Chinese beef industry has been declining in recent years, with rural workers continuing to drift to cities where wages are higher. Professor Ben Lyons, from the University of Southern Queensland’s Rural Economies Centre of Excellence, has noted that the industry has been experiencing a decline in the number of small-scale producers, with larger herd sizes and aggregation becoming more common. The new tariff is seen as another challenge in China’s agrifood and geopolitical aspirations, with the country seeking to control its food supply and protect its domestic industry.
Alternative Markets
Australian businesses are looking for alternative markets to export their products, but this may come at a lower price, affecting the profitability of farmers and processors. Edwards has noted that while the US and South East Asia may be potential markets for lower-cost products, the more expensive cuts will be harder to shift. Meanwhile, Mackenzie has called for the federal government to work with the sector’s peak bodies to implement a system to ensure fair access to the 205,000-tonne quota, allowing suppliers to have a more even playing field in the Chinese market.
Conclusion
In conclusion, the introduction of China’s 55% tariff on beef exceeding the 205,000-tonne quota is set to have a significant impact on Australian cattle farmers producing Wagyu and Angus beef. The tariff is expected to lead to a substantial decrease in Australian beef exports to China, with high-end products being the most affected. While Australian businesses are looking for alternative markets to export their products, this may come at a lower price, affecting the profitability of farmers and processors. The global beef market is expected to be flooded with products from other major exporters, leading to a potential price drop in the second half of the year.
