China to drive growth of pork protein

As the impacts of African swine fever in Asia fade, pork will lead a global animal protein production surge in 2021. Locally, however, production growth will be limited, as Australia’s beef and sheep producers focus firmly on rebuilding stock numbers.
In its just-released Global Animal Protein Outlook 2021, agribusiness specialist Rabobank said China’s initial recovery from African swine fever (ASF) would emerge as the biggest driver of growth in the global animal protein sector in the year ahead – while also representing the greatest risk for global trade.
Rabobank senior animal protein analyst Angus Gidley-Baird said production growth was expected across most key animal protein markets around the world in 2021, and within most species, after a challenging 2020.
“Pork production is expected to grow faster than its protein counterparts in 2021, driven by the ASF recovery in China and Vietnam, while poultry and aquaculture are also expected to grow based on post-COVID-19 improvements to foodservice,” Gidley-Baird said.
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Beef should return to modest growth, he said, led by increased production in North America and Brazil, while wild-catch seafood would go against the growth trend, with a small decline expected due to climatic conditions and reduced quotas.
Australian outlook
With the smallest cattle herd in over 25 years, and favourable seasonal conditions, the report said Australia’s beef production would be restricted in 2021, with slaughter numbers to dip slightly from 2020.
Despite this, Gidley-Baird said improved pastoral conditions would increase average carcase weights, leading to a small lift in both production and exports in 2020.
Ongoing competition from producers, feedlotters and processors would also ensure cattle prices remained strong, although prices would ease as numbers build.
“Continued high female slaughter rates in 2020 and high livestock prices suggests a focus by producers on trading cattle rather than retaining them for breeding, and we expect herd rebuilding activities to extend into 2021,” Gidley-Baird said.
Australian lamb slaughter was however expected to increase in 2021, despite the country’s smallest sheep flock in over 75 years.
“Better breeding conditions and an increased focus on lamb production will drive increased lamb slaughter and, while carcase weights are expected to remain steady, production and, in turn, exports should grow,” Gidley-Baird said.
Domestic demand for sheep and flock rebuilding was forecast to remain firm, with export demand key to lamb pricing. And, with softer economic conditions prices –would be lower than in 2020, although remaining good, he said.
African swine fever driving change
Globally, recovery from ASF in China would be the major factor impacting the animal proteins sector in the year ahead, the report said.
China’s pig herd started its recovery in 2020 after nearly halving in size the previous year due to ASF, and would continue to grow strongly in 2021, Gidley-Baird said.
While ASF still threatens many of China’s smaller pork producers – who make up about half of the production – Rabobank expects the ongoing recovery would see the 2021 herd inventory reach above 80 per cent of pre-ASF levels.
ASF still remained active across the globe, with Germany continuing to manage an outbreak detected in September 2020, Mr Gidley-Baird said. And further herd losses were likely in the Philippines and also Vietnam, where, despite sporadic outbreaks in 2020, there was still expected to be an increase in pork production in 2021.
China to dominate global trade
Despite the recovery in China’s domestic pork production, Chinese imports of pork, poultry, beef, and seafood will continue to dominate global trade, the report says.
And, as such, any irregular swings from China could have significant consequences for producers and markets.
“Changes in China’s import policies, shifts in China’s commitment under the Phase One Trade Deal with the US or moves to avoid human or animal health risks could all present trade issues in the coming year,” Gidley-Baird said.
COVID-19 recovery
Gidley-Baird said recovery from COVID-19 would also impact the global animal protein market in 2021, with issues surrounding foodservice recovery, labour availability costs, supply chain transformations and food safety creating both opportunity and risk.
In the beef sector, Gidley-Baird said, labour availability and cost would remain the most pressing challenge for global beef processing and production.
“Given the higher cost and reduced opportunities in foodservice, margin squeeze will also be a challenge, however foodservice recovery will help lift these margins, particularly for higher-value beef cuts served in restaurants,” he said.
Reduced global poultry demand due to the economic downturn in some importing countries had impacted trade and created the need for more focus on domestic consumers, but Gidley-Baird said foodservice recovery would help balance out supply and demand.
Similarly the global pork market would shift its focus away from exports towards local consumers, mainly due to ASF but also COVID-19.
“Global seafood trade has been greatly affected by COVID-19, and the market risk will be ongoing pending foodservice recovery and improved demand – sectors such as shrimp are yet to recover from trade disruptions.” he said.
However post COVID-19 opportunities would also emerge, Gidley-Baird said, largely on the back of foodservice recovery and the rise of e-commerce direct-to-consumer trends.
Technology and innovation for a more sustainable sector ‘Tech innovations’ – such as methane-reducing additives which improved feed efficiency, or traceability to mitigate animal disease risk and offer supply chain transparency – exemplified an increasing focus on sustainability and productivity in animal protein, the report said.
These technologies, Gidley-Baird said, would enable and accelerate commercial adoption into 2021 – helping drive environmental, social and economic sustainability.
The increasing role that the market and regulators would play in improving the sustainability of the animal protein supply chain would also become clearer in 2021, Gidley-Baird said, with the number of animal protein, food retail and foodservice companies making commitments to a lower environmental footprint likely to grow.

Mintel research reveals the ‘new normal’ for China’s economy

For the latest in consumer and industry news, top trends and market perspectives, stay tuned to Mintel News featuring commentary from Mintel’s team of global category analysts.
Mintel, the experts in what consumers want and why, today launched Chinese Consumer 2020 , an in-depth analysis of the Chinese consumer market, and sixth-annual flagship report from Mintel Reports China. In this latest report, Mintel research and analysis provides a firm understanding of Chinese consumers’ shifting behaviours and attitudes during and post-COVID-19, with insight into China’s economic environment, consumer expenditure, as well as the food and drink, beauty and personal care, OTC and pharmaceuticals, clothing and accessories, technology and communication, home, transport, leisure and entertainment, and personal finance and housing markets.

Earlier today, Mintel welcomed  a number of distinguished guests to participate in a panel discussion at The Chinese Consumer 2020 press conference in Shanghai, including Elan Shou, regional director, Ruder Finn Asia; Kiran Patel, senior director, business development, China-Britain Business Council (CBBC); and Ms. Ruyi Xu, head of Mintel reports, North Asia. Each shared their views on the impact of the COVID-19 outbreak on the Chinese consumer market, including consumer attitude and behaviour changes.
As discussed during the panel, the Chinese consumer market is facing more challenges than ever before; nevertheless, as the coronavirus situation improves, Mintel research indicates that most consumer goods categories are gradually recovering, including some discretionary categories such as dining out, clothing, beauty and personal care, and leisure and entertainment. However, this does not indicate that consumer spending will immediately return to pre-COVID-19 levels.
Key findings from Mintel’s Chinese Consumer 2020 report include:
Chinese economy recovers quickly, showing it remains resilient
The COVID-19 outbreak has had an unprecedented impact on both society and the economy, but effective anti-epidemic measures have laid a foundation for economic recovery. In mid-July, China’s National Bureau of Statistics (NBS) released preliminary accounting results for China’s GDP in Q2 2020 which showed the economy is on track to recovery. This recovery will be quicker than many other major global economies which have gone into lockdown at different stages in Q1/Q2 2020. This is another encouraging sign, showing the fundamentals of China’s economy are not only unshaken but also resilient.
Beauty and personal care sector stands out despite slowed growth in consumer spending
China’s top five sectors with the highest growth rates remained unchanged 2010-2019, including holidays at CAGR of 18 per cent, transport at CAGR of 16.4 per cent, OTC and pharmaceuticals at CAGR of 13.6 per cent, foodservice at CAGR of 13.1 per cent, and personal finance and housing at CAGR of 12.9%. However, while growth in most categories has tapered off due to slowed growth in overall consumer spending, since 2017, the beauty and personal care sector has seen similar compound annual growth rates (CARG) 2010-19, including a 9.2 per cent increase in 2019.
Path to recovery varies by sector
Sectors like holidays and foodservice, which require consumers to leave the home and potentially gather in small or large groups, saw reduced spending in Q1. Mintel predicts that under the current circumstances (that the outbreak is largely under control despite reported new cases), total consumer expenditure will experience a contraction of 5.6% in 2020. But, in the long term, Mintel predicts that total consumer expenditure will recover to pre-COVID-19 levels in 2021 and continue to rise at CARG of 7.3% 2021-24.
Consumers adapt to changes and balance is restored to daily life
Nearly six out of ten Chinese urban consumers (56 per cent) want to have a happy family life and 46% seek a healthy lifestyle; meanwhile, 39 per cent of Chinese urban consumers say that they want to travel after the outbreak, according to Mintel research.
“Priorities on consumer goods categories represent key areas of consumer spending, and the coronavirus pandemic has made consumers more focused on their family and health,” said Xu. “In particular, the consumer habit of spending within their means and a more cautious attitude towards spending as a result of the coronavirus outbreak will push brands to consider new strategies to cope with the ‘new normal’. This will be mainly reflected in helping people find a balance in life and enjoy the quality and pleasure of life through small indulgence and embracing simple moments.”
At the panel discussion,  Shou said, “Consumer mindsets and attitudes are constantly evolving in today’s ever-changing world. Consumer behaviors have shifted remarkably due to the coronavirus in the past ten months. This has also affected some sectors related to offline purchases and in-person consumer experience, such as foodservice, tourism and hotels. Therefore, how to properly understand the client’s growth pain points and innovate on communication strategies is also a manifestation of professionalism and flexibility in the public relations industry. Ruder Finn understands the importance of data analysis and offers meaningful output using data to help clients achieve their communication goals and business results.”
“In the current backdrop of the global outbreak, China-Britain Business Council has followed up with market changes in the United Kingdom and China, and actively innovated on communication platforms and channels in a bid to drive Britain-China trade with more digital solutions and assist companies in our two countries with online communication,” said Patel. “ For example, CBBC recently-launched UK-China Business Matching Digital Platform, which is set to support the offline trade show China International Import Expo (CIIE), allowing companies to highlight their core competencies on this platform and to build a big data trade ecosystem. We always believe innovation will help companies across industries stay ahead of the curve, accelerate development and win the future.”

COVID-19 to add extra US$1.6bn to milk sales in China in 2020

Milk, the largest dairy category in China, is predicted to stand at US$26.9bn in 2020, US$1.6bn greater than the previously projected pre-COVID value. This translates to an increase on expected volumes from 9.6 billion kg to 10 billion kg in 2020 alone, primarily due to health concerns relating to COVID-19, according to GlobalData, a leading data and analytics company.

“China invested heavily in modernizing its dairy industry for the past several years and officially promotes milk consumption on the basis of its health benefits. Refrigeration has become increasingly ubiquitous in China, meaning that modern consumers have the space to store milk and other dairy products for longer,” Ryan Whittaker, consumer analyst at GlobalData said.  “Milk is often positioned as a means to get more protein into their diet, and to help build and maintain the body’s immune system. Of course, COVID-19 pandemic has forced Chinese consumers to focus on their health, prompting a surge in demand.”

GlobalData forecasted annual milk sales in China, which were valued at US$24.2bn in 2019, to increase gradually to US$29bn in 2023. Following COVID-19-related disruptions, the projected figure is now closer to US$31bn, with the largest jump in sales occurring in 2020.

GlobalData’s most recent consumer survey found that 47 per cent of Chinese consumers consider themselves ‘extremely concerned’ about their health, whilst a further 52% said that they were ‘quite’ or ‘slightly concerned’ – in fact, only 2% of respondents said that they were ‘not concerned’ about their health at all.

When asked about white milk buying habits, a shocking 51% of respondents said that they were buying more than before, in addition to the 34% who said they were buying the same as before.

“The impact of COVID-19 on cooking at home should not be overlooked. During China’s lockdown, consumers were forced to remain at home and cook for themselves far more than before, and in doing so, ate out and on-the-go much less than before,” Whittaker said. “Milk offers a simple way to top-up nutrition at home with minimal effort while helping China’s dairy industry. Clearly, the milk category will do well during the pandemic, and attitudes towards health, supported by the government’s pro-dairy campaigns, are likely behind it.”

Top five trends driving China’s dairy sector

China’s dairy sector has witnessed growth from US$83bn in 2018 to US$87bn in 2019 and is forecast to grow at a compound annual growth rate (CAGR) of 6.1 per cent between 2019 and 2024. As the sector continues to evolve, GlobalData, a data and analytics company, highlights the top five innovation trends that are set to impact the marketing and sales of dairy products in the country.

Premium focus
Chinese firms have been investing in dairy farms and processing capacity. For instance, Yili acquired New Zealand’s second largest dairy co-operative Westland in 2019 to deliver premium-priced imported dairy products in line with 16 per cent of the Chinese consumers, who are willing to spend on the premium end of the price range for high-quality and innovative dairy products, according to a recent survey by GlobalData.

“Premium product market will continue to thrive under the selling points like organic, health, and nutrition, sufficing the increased demand of health-conscious consumers,” said Sumit Chopra, consumer research director at GlobalData.

Plant-based new product development
With 27 per cent of Chinese shoppers buying alternative plant-based dairy products consumers are re-assessing their dependence on animal products and exploring sustainable sources of protein. As this number grows dairy manufacturers are becoming more ‘plant-curious’ and developing new products to cater for this need. For instance, in May 2020, Nestle announced a series of investments to enhance its plant-based offerings and further strengthen its footprint in China.

Alternative animal-based milks
Alternative animal-based products like goat milk and camel milk are finding more appeal as alternatives to cow’s milk with 68 per cent of Chinese consumers finding them ‘somewhat / very appealing’ as they offer a different choice whilst providing the nutritional benefits of animal-based dairy. Resonating with the huge demand for alternative milk in China, Kazakhstan’s Eurasia Investment established a dairy factory for camel milk in China with plans to launch horse milk powder.

On-the-go nourishment
The healthiest snacking behavior tends to occur between breakfast and lunch with China’s dairy sector targeting this consumption occasion with healthier, nourishing and satisfying on-the-go choices in portable packaging formats. In line with busy millennial’s on-the-go consumption, Swedish brand The Original Oatly! launched an oat milk-based ‘recovery drink’ in a teardrop-shaped drinking aperture to top, aiding hard-pressed individuals to consume it wherever and wherever needed.

Trendy flavours
The desire for novelty and surprise is evident among Chinese consumers, with ***37% of shoppers looking for unusual, new and ’trendy’ dairy product flavours. Recently in China, Mengniu Dairy Co., Ltd. launched Mengniu ‘BIO-V2’, a flavored fermented milk that brings a white peach flavor to fermented milk for an uncommon flavor experience.

“The innovation trends we are seeing in China’s dairy market this year are challenging the country’s traditional manufacturers to satisfy a range of consumer demands by offering them products with unique functional and sensory experiences,” said Chopra.

Mengniu Dairy opt out of Lion deal

Beverage giant Lion and China-based Mengniu Dairy have agreed to part ways on the $600 million deal that was supposed to have the Chinese company take over brands such as Pura milk, Dare iced coffee and Yoplait yoghurt.

The sale was abandoned after federal treasurer Josh Frydenberg made it clear that the Foreign Review Board was unlikely to approve of the sale. “contrary to the national interest”.

The sale was announced last November, but soon caught the eye of government regulators, who Frydenberg said and found that the sale was contrary to national interests.

It comes on the back of several similar issues including China imposing tariffs on Australian barley, and starting an investigation of alleged dumping cheap Australian wine onto the Chinese market.

Lion realeased a statement stating the deal was no longer viable.

“Lion notes that China Mengniu Dairy Company Limited has been awaiting the outcome of the Foreign Investment Review Board review of its proposed purchase of Lion Dairy & Drinks,” the statement said.

“Given this approval is unlikely to be forthcoming at this time, Lion and Mengniu Dairy have mutually agreed to cease the current sale process.

“We are disappointed with this outcome and will now consider pathways forward in relation to the Lion Dairy & Drinks business.”

COVID-19: a catalyst for China and Southeast Asia foodservice retail push

COVID-19 has negatively impacted restaurant revenue. A webinar to be held by food intelligence specialist Mintel, will look at the opportunities for Chinese and Southeast Asian foodservice players to diversify their business model from take-out and dine-in to include selling packaged ready-to-cook and ready-to-heat foods.

In this webinar, Mintel’s Food and Drinks analysts will share their expertise around three areas that are key for brands:

  • The uncertainty of future calls for change

  • Explore the opportunity of in-home consumption

  • E-commerce is the next frontier for foodservice

Speakers include:

Heng Hong Tan, APAC Food and Drink Analyst
As an APAC Food and Drink analyst, Heng Hong has over 10 years of experience identifying emerging food and drink trends. He is always on the lookout for the latest food and drink products in his frequent travels in the region.

Daisy Li, F&D Associate Director, China
Daisy is an Associate Director with the Mintel Food & Drink team, specialising in the China market. She monitors and reports on the latest innovation and trends impacting the Chinese food and drink market.

To register for the event, click here.

Feedback wanted for China-Australia Free Trade Agreement

Provide your feedback to DFAT on the first 5 years of trading under the China-Australia Free Trade Agreement by 31 July 2020.

The Department of Foreign Affairs and Trade (DFAT) is now seeking feedback on the China-Australia Free Trade Agreement (ChAFTA), as we mark its 5th year of being in force.

Businesses and any other interested stakeholder can provide their written submission, which will help inform DFAT’s 5 year Post-Implementation Review (PIR) of the ChAFTA.

The Assistant Secretary of the Department of Agriculture, Water and the Environment Strategic Trade Policy and North Asia Branch, Amy Fox, said that Australia’s agriculture, food, fisheries and forestry sectors are important players in our trading relationship with China, and that their feedback is vital to the ongoing shaping of the agreement.

“Primary producers and exporters in this sector benefited to the tune of $15.9 billion in 2018-19 thanks to the trade relationship with China,” Fox said.

“It’s important that we continue to review and seek industry feedback on our existing FTA with China, despite any current trade issues in this space. This agreement shapes how industry does business, and so their input is invaluable, and we strongly encourage submissions to this review, particularly from the agriculture sector.”

Interested stakeholders have until 31 July 2020 to make their submissions.

The Post-Implementation Review marks the first 5 year review of ChAFTA since the agreement came into force on 20 December 2015. Since the agreement’s implementation, the export of Australia’s agricultural products to China has increased by 60 per cent.

Tariff cuts under the agreement to products like beef, veal, dairy, citrus and table grapes has led to growth in exports for each of those products.

“Your feedback to the Post-Implementation Review panel will inform the Australian Government on the impact ChAFTA has on your business. We want to know how it has affected your competitiveness in the market, and your ease and cost of doing business,” Fox said.

“The Post-Implementation Review seeks to uncover any unintended impacts of the agreement, whether beneficial or not. Your opinion on whether ChAFTA has delivered a net benefit to the Australian community is also valuable.”

Red meat exports to China remain strong due to swine fever

African swine fever remains the key driver impacting the global animal protein market, despite the effects of COVID-19 on demand, Rabobank’s latest African Swine Fever Update has shown.

And this is being borne out in Australia’s red meat exports to China, which remain strong, according to latest figures.

The Rabobank update said African swine fever was still the major influence on global pork markets, and it continued to impact pig herds and restrict pork production in China, Vietnam, the Philippines and parts of eastern Europe.

Despite Australia’s total red meat exports being down 16 per cent year-on-year in May, exports to China are down only four per cent – reflecting strong Chinese demand in the wake of African swine fever, despite disruptions due to COVID-19.

Rabobank senior proteins analyst, Angus Gidley-Baird said considering Australia’s reduced production, current export figures highlight China’s strong appetite for Australian protein.
“While exports into China are not quite at the levels they were at the end of last year – when African swine fever-driven pork shortages were driving strong Chinese demand and Australian production was much higher – they are close to levels seen at the start of 2019, which is a positive outcome for the domestic industry,” Gidley-Baird said.

China’s pork production is expected to decline by a further 15 to 20 per cent in 2020, while in Vietnam and the Philippines, declines are expected to be close to 10 per cent, prompting further import demand from these countries.

In China, Mr Gidley-Baird said, pork imports were expected to reach record levels, while imports of other animal protein types would also be strong.

“China’s pork import growth accelerated in the first four months of 2020, with meat imports up 180 per cent, year-on-year, and variety meat imports up 29 per cent year-on-year,” he said.

Rabobank maintained its view that China’s pork imports would reach a record level of about 3.5 million metric tonnes in 2020, with the majority of product supplied from the US, under the US/China ‘phase one’ trade deal.

However,  Gidley-Baird said imports for the rest of 2020 were still full of uncertainty, with disruptions to pork production and logistics in exporting countries, and movement in China’s domestic pork prices.

He said imports could ease through the current quarter, picking up again in quarter three and quarter four.

“But, COVID-19 and slower economic conditions aside, the protein gap created by African swine fever provides a strong demand force that will help support prices for Australian red meat exports for the remainder of 2020,” Gidley-Baird said

“African swine fever will continue to underpin Chinese demand for Australian sheep and beef exports, as consumers look to substitute pork with alternative protein options.”

The way forward after China’s barley tariff

China’s decision to impose heavy tariffs on Australian barley and the alleged connection with Australia’s call for an independent international investigation into the origins of the Covid-19 pandemic has been widely reported in recent weeks.

What is more important now is to understand the technical details of China’s decisions and the possible ways forward for Australia.

The tariff applied on barley exported from Australia as a result of decisions by China’s Ministry of Commerce on 18 May is in two parts: an anti-dumping duty of 73.6 per cent and a countervailing duty of 6.9 per cent.

This is the first time China has applied such duties against Australia since the establishment of its trade remedy regime in 1997.

The anti-dumping and countervailing investigations commenced respectively in November and December 2018, examining the period between 1 October 2017 and 30 September 2018 (known as the Period of Investigation).

Given the significance of the anti-dumping decision, this is the first focus. The high duty resulted from the approach the Ministry of Commerce adopted to determine the dumping margin.

By definition, “dumping margin” is the extent to which export prices of goods are below the “normal value” of the goods.

Normal value is generally determined by reference to the price of the goods in the domestic market, but may also be based on the cost of production of the goods or export sales to a third country in certain circumstances.

Essentially, China found that Australian barley producers and exporters had not provided sufficient information for the calculation of the normal value and export prices, and therefore determined the two prices based on “best information available”.

As a member of the World Trade Organisation, China’s anti-dumping law and practice must comply with WTO anti-dumping rules.

These rules allow the use of “best information available” when an interested party fails to provide requested information within a reasonable period of time.

As a result, the Ministry of Commerce applied the price information of Australia’s barley exports to Egypt in calculating the normal value, and the price information of Australia’s barley exports to China in calculating the export prices, using an independent database known as the Global Trade Atlas

Australian barley producers and exporters subject to the duties may apply for an administrative review after the tariff has been in place for 12 months.

The use of “best information available” typically results in the calculation of higher dumping margins and hence heavier anti-dumping duties.

Both Australia and China have employed this approach to determine dumping margins in their previous anti-dumping investigations. However, the WTO-legality of an anti-dumping investigation must be assessed independently based on the facts in each investigation and cannot be determined by any WTO member unilaterally.

This means that China’s use of “best information available” in the barley case cannot be assumed to be contrary to WTO rules.

Interesting enough, the Ministry of Commerce appears to have refrained from retaliating against Australia’s frequent use of the so-called “Particular Market Situation” approach and surrogate cost in its own investigations against China.

Such an approach in cases involving Chinese steel and aluminium products has been highly controversial as it essentially treats China as a “non-market economy”.

While Australia recognised China as a full market economy in 2005 as a precondition for the negotiation of the China-Australia Free Trade Agreement (ChAFTA), it has routinely resorted to this approach against China in the past decade, leading to more and higher anti-dumping duties. The Ministry of Commerce has consistently and vigorously criticised Australia’s approach.

When the barley investigation commenced, it was anticipated that China may apply the same approach against Australia. The Ministry of Commerce did investigate this issue by asking the Australian government to provide information on the market situation in the relevant Australian industry but did not make a decision on it. Nor did the Ministry of Commerce explain why no decision was made.

It was perhaps because it had insufficient evidence to support a finding of the existence of a “Particular Market Situation” in Australia’s barley industry.

However, the Ministry of Commerce could still pursue such an approach in future anti-dumping investigations.

Given the low rate of the countervailing duty, the anti-subsidy decision would be less controversial.

While the China Chamber of International Commerce requested consideration of what it regarded as 32 of Australia’s national and state subsidy programs, the Ministry of Commerce considered only three measures.

The one that led to the most significant subsidy margin of 5.82 per cent was the “Sustainable Rural Water Use and Infrastructure Program”. The Ministry of Commerce found that this program has been primarily used for the Murray-Darling Basin to promote efficient use of water for agricultural activities, and that barley producers have been a major beneficiary.

In calculating the subsidy margin, the Ministry of Commerce found that neither the Australian businesses nor the Australian government had provided the requested information.

It then relied on the information provided by the China Chamber of International Commerce, i.e. the “best information available”, finding the total subsidy amounted to $10 billion.

This background is important to understanding what could be the next steps for Australia. The new duties will apply to all Australian barley exports to China for five years.

This total 80.5 per cent tariff will be significant enough to exclude Australian barley from the Chinese market. Without it Australia would have enjoyed a tariff exemption for its barley exports to China under ChAFTA, thereby enjoying a competitive advantage over other major barley suppliers which are generally subject to a 3 per cent import tariff in China.

Australian barley producers may apply for a “new exporter” review provided that they did not export barley to China during the Period of Investigation and are unrelated to any of the exporters or producers already subject to the duties.

Once an application is received, the Ministry of Commerce is required to carry out a review and determine an individual dumping/subsidy margin for the applicants on an accelerated basis. It is possible, therefore, for a new exporter to receive a lower tariff.

Australian barley producers and exporters subject to the duties may apply for an administrative review after the tariff has been in place for 12 months. The review may lead to a decision which maintains, alters or revokes the duties.

For the Australian government, WTO litigation would not be a pragmatic solution. The difficulty is not so much about the ongoing paralysis of the WTO’s appellate court after the Trump administration blocked the appointment of new members of the Appellate Body. An interim appellate mechanism has been established by 19 WTO members, including Australia and China, in a bid to temporarily maintain the integrity and efficacy of the WTO’s dispute settlement mechanism.

Rather, the difficulty is that even if Australia brings a WTO case, it will take years to complete without a guaranteed win. And even if Australia wins, China may simply initiate a reinvestigation into the matter and eventually maintain its original decision. This process may well take as long as the life of the anti-dumping duty, which may well expire after five years. The longer the duty exists, the harder it would be for Australian barley producers to regain market share in China.

A more sensible approach would be for Australia to seek to defuse the bilateral tensions through diplomatic channels.

The fact that China has now become more amendable to the Covid-19 investigation is a good sign that the tensions may not escalate.

However, more needs to be done for the two sides to rebuild the political will needed to strengthen economic cooperation and pursue deeper and wider liberalisation for mutual benefit.

In this context, Australia would be in a good position to convince China to remove the barley tariff. The Ministry of Commerce has the flexibility to do so at any time by commencing an administrative review on its own initiative.

Birmingham defends Australian barley farmers over access to Chinese market

The Australian Government is deeply concerned by reports that duties may be levied on Australian barley imports into China. Simon Birmingham, the Minister for Trade, Tourism and Investment released a statement supporting grain producers.

“Our barley producers operate in a competitive global market without any trade distorting subsidies and price their products in an entirely commercial way,” said Birmingham. “We have worked with the Australian grains industry to mount the strongest possible case against China’s anti-dumping investigation. We will use the remaining time before China finalises its decision to continue our efforts to resolve this matter satisfactorily and will seek to uphold the integrity of our world leading barley producers.

“While Australia respects China’s right, as with any nation, to undertake domestic investigations into anti-dumping matters, we do not accept that there is a prima facie case, let alone a conclusive case, to find dumping by or subsidy of Australian producers.

“Australia will reserve all rights to continue to defend the interests of our barley producers.”

Securing freight access for agricultural and fisheries exporters

A new $110 million initiative will back Australia’s agricultural and fisheries sector by helping them export their high-quality produce into key overseas markets, with return flights bringing back vital medical supplies, medicines and equipment.

In addition, around $10 million in Australian Fisheries Management Authority (AFMA) levies will also be waived for all Commonwealth fishers, ensuring they do not have to pay Commonwealth levies for the remainder of 2020.

Deputy Prime Minister Michael McCormack said the International Freight Assistance Mechanism would help secure freight flights into Australia’s key export markets.

“This will help restore key freight routes for our farmers until commercial capacity can be restored again,” McCormack said. “We are doing everything possible to help our high-value agricultural and fisheries exporters get their produce on airplanes and into overseas markets.

“Everything we are doing as a Government in response to this pandemic is focused on saving lives and saving livelihoods and we know our agriculture industry is key to this.”

Federal Trade Minister Simon Birmingham said the COVID-19 pandemic had led to major air freight shortages and had disrupted supply chains around the world.

“This temporary action will help Australian producers to protect the jobs of those who rely upon Australia’s export of safe, quality food into the world,” Birmingham said.

“Getting our export sector back on its feet is crucial to reduce job losses through the crisis and a critical part of the ultimate economic recovery. By getting flights off the ground, full of Australian produce, we’re supporting our farmers and fishers who have been hit hard by this crisis.”

Federal Agriculture Minister David Littleproud said this initiative would focus on high-demand agricultural and fisheries exports who have been hit hard by the COVID-19 crisis.

“We’re backing our farmers by making sure they can get more of their high-quality product into overseas markets,” Littleproud said. “The more agricultural exports we can secure, the more regional jobs we can protect.”

Assistant Minister for Forestry and Fisheries Jonno Duniam said the freight assistance and levy relief was a lifeline for Australian fishers.

“The fishing industry was one of the first hit when access to China was cut off in January, bringing many in the industry to their knees,” Assistant Minister Duniam said. “Unlocking key international markets will get thousands of fishers, divers, deckhands and processors back on the job, and the levy relief will help to keep fishers financially afloat.

“Our seafood industry has been built on the back of some of the toughest and most resilient Australians, and this assistance will ensure that the sector can build a bridge to recovery.”

The International Freight Assistance Mechanism will initially focus on the key markets of China, Japan, Hong Kong, Singapore and the UAE, with four key departure hubs: Melbourne, Sydney, Brisbane and Perth.

It will be overseen by Michael Byrne, who has been appointed as the international freight coordinator general. Byrne has international logistics experience as managing director of Australia’s two largest logistics companies Toll Holdings and Linfox plus as a non-executive director of Australia Post.

Byrne will work with Austrade to help establish arrangements with exporters, airlines, freight forwarders and industry bodies plus oversee the mechanism’s operations including advising the Government of destinations, freight selection and prioritisation.

The initiative is part of the Government’s $1 billion Relief and Recovery Fund to support regions, communities and industry sectors that have been disproportionately affected by COVID-19. Securing freight access for agricultural and fisheries exporters

Global potato protein market to reach $ 128.9 Mn by 2029

The global potato protein market size is expected to reach $222mn by the end of 2029. According to a study, the market will show a steady rise at 4.3 per cent CAGR between 2019 and 2029. According to the report, the rising demand for healthier and plant-based food alternatives will stoke growth of the market. The report offers a comprehensive insight into the market. It covers key growth drivers, restraints, opportunities, and prevailing trends. It uses unique research methods to offer the most accurate analysis of the market. The report profiles some of the leading market players examines the impact of their growth strategies on the overall market.

It includes in-depth insights into the potato protein market. Some of these are:

  • The estimated value of the market was at $145 Mn in 2019. Through the course of the report’s forecast period, the market is exhibited to show a steady pace of growth.
  • Regionally, North America emerged as a key market for potato protein.
  • Europe and Latin America will report steady rise as key markets for potato protein.
  • Among potato protein types, concentrates will witness high demand through the forecast period.
  • Key players are likely to focus on introducing new products to stay relevant in the market.

“In the coming years, the potato protein market will gain impetus from the rising demand in developed regions. The rising demand for healthier meat alternatives and inclination towards plant-based protein will increase potato protein sales in regions such as North America, Europe and Latin America,” said a lead analyst.

Increasing application in food and beverages sector to boost growth
Potato protein is widely used in infant formulas, food supplements and dairy products. Therefore, the increasing consumption of dietary protein will bode well for the market. Furthermore, the market is expected to gain from the expansion of the food industry. Because countries such as China, India, and Brazil exhibit high food demand, they are identified as some of the most lucrative markets for potato protein. In addition to this, the rising health consciousness among consumers will enable growth in the market

Who is winning?
Some of the leading players operating in the potato protein market are (Avebe, Tereos, Agrana, Roquette, Omega Protein, Pepees Group, Emsland Group, Meelunie, KMC Ingredients, Südstärke, AKV Langholt, PPZ Niechlow and others.

As a result of increasing competition, potato protein manufacturers are focusing on expanding their product portfolio and improving sourcing processes. Their expansion strategies are further aided by agreements between them and local players across emerging market. These companies are particularly focusing on catering to changing consumer preference across various applications.

In addition to this, mergers and acquisition remains a popular strategy among market players. Companies intend to expand their regional footprint through strategic collaborations

ACCC okays Chinese dairy acquisition

The Australian Competition & Consumer Commission (ACCC) has given the nod to China Mengniu Dairy Company Ltd (Mengniu) for the proposed acquisition of Lion Dairy & Drinks Pty Ltd (Lion D&D).

“Mengniu Dairy was already looking for opportunities to diversify its business and expand its brand presence in the emerging markets. The transaction will allow Mengniu to enhance its presence in the Australian market and strengthen its portfolio by leveraging Lion’s longstanding brand presence and manufacturing and cold chain distribution hold across Australia. The transaction will strengthen Mengniu with a stronger foundation to excel in the Asia-Pacific (APAC) region,” said Shagun Sachdeva, consumer insights analyst at GlobalData, a  data and analytics company.

Mengniu has recently completed the $2.2bn takeover of infant formula company Bellamy’s Australia, in line with its aggressive acquisition strategy. The series of acquisitions will create greater synergies for the group not only from the geographical footprint point of view but also from the supply chain perspective as well.

At the same time, Lion has been trying to sell its dairy portfolio since 2018, which comprises of Big M, Pura, Dairy Farmers, Berri and Daily Juice brands. In October last year, Lion sold its specialty cheese business to Saputo Dairy Australia, with plans to focus on high-margin alcoholic beverage and premium non-alcoholic drinks in Australia and New Zealand.

“According to Global Data, the APAC dairy and soy food sector is forecast to grow from $194bn in 2018 to $254bn in 2023, registering a compound annual growth rate (CAGR) of 5.5 per cent,” said Sachdeva. “Milk was the largest category in the APAC dairy and soy food sector, followed by drinkable yogurt and cheese. The Australian dairy and soy food sector is expected to reach from $12.1bn in 2018 $14.8bn in 2023.

“The news of getting a green signal from ACCC comes at an extremely delicate time when China is going through tough times because of coronavirus and hence, it will be interesting to see how the deal will pan out in the future.”

How will the coronavirus affect agriculture in Australia?

The coronavirus outbreak is already having a severe impact on China’s foodservice and on-trade channels and this could become “more serious and longer-lasting” if the virus is not contained in the next six to eight weeks, leading agribusiness banking specialist Rabobank has warned.

But the extent of the impact on Australia’s agricultural sector will be limited in the short-term and will depend on how quickly the virus is contained, it says.

In a just-released report by the bank’s China-based research team, Recent Coronavirus Impacts on Chinese F&A, Rabobank says “disruptions are being experienced across the entire F&A (food and agri) supply chain” with the virus – which has infected more than 40,000 people to date – disrupting trade, production and supply chains as well as having a significant impact on out-of-home food consumption with the closure of many foodservice outlets.

With the virus outbreak arriving at the peak of 2020 Chinese New Year activities, it has had a large impact on out-of-home dining in the country, the report says.

“Given what we have seen on the ground, along with news received from major chains – for example, the closure of stores by Starbucks, Haidilao, McDonald’s, and Yum China – potential revenue losses for both retail and foodservice for the Chinese New Year week could range from 20 per cent to 80 per cent”. A loss of between USD 31 billion to USD 124 billion across retail and foodservice, it says.

While the report says a quick and effective containment of the virus could lead to a rapid bounce-back, the longer the virus is uncontained beyond March, the more extensive, sustained and structural the impact will be on the F&A chain.

For Australia
Regardless of when coronavirus is contained, Australian-based head of Rabobank Food & Agribusiness Research, Tim Hunt says it will “almost certainly” have a larger impact on food and beverage industries than the global SARS (Severe Acute Respiratory Syndrome) epidemic in 2003 – including in Australia.

Discussing the current and potential impacts of the virus on Australia and New Zealand’s food and agribusiness industries in a podcast, Coronavirus: How worried should we be, Mr Hunt says coronavirus has already spread more widely than SARS but it is Australia’s “much larger exposure to China” that is the biggest difference between current events and SARS.

“If we go back to 2002 just before the SARS crisis, Australia sent eight per cent of its ag exports to China”, Mr Hunt says. And this was largely in the form of fibre to be processed for export.

Fast forward to 2020, he says, and Australia sends around 28 per cent of its food and agricultural exports to China, much of which is consumed within China. “Add to that, the stronger links that have been developed between Australia and China in terms of exports, tourism, education and investment, we have a very different environment in which we might see the potential impacts of coronavirus this time compared to SARS in 2003.”

There are likely to be both first and second-round impacts of coronavirus on the Australian agricultural sector, Mr Hunt says, with the first round already being felt by any food and ag business relying heavily on the food service channel in China, particularly perishable goods.

“For example, rock lobster shipments to China have all but ceased in the last couple of weeks,” he says, “while chilled meat shipments for food service are also a risk category given a lot of hot pot restaurants are closed at the moment.” And while wine isn’t perishable, Mr Hunt says, sales are also likely to be low for those focused on the Chinese food service industry.

While Chinese consumption of meat, dairy and grains is unlikely to fall in the short-term, Mr Hunt says if the virus continued for many months to come, second-round impacts –“likely to hit our F&A industries” – would come into play.

“Hopefully we won’t get to ‘round two’,” he says, “but if we do, incomes may fall in China and we may eventually see less growth in sales of premium food and beverages as that wealth effect starts to kick in.

“And this may start to go beyond just food service sales and logistical disruptions to potentially impacting consumption in general of meat, dairy, grains and seafood.”

That said, Mr Hunt says, in the event coronavirus has second-round effects, the currency exchange rate would act as an “important stabiliser” for Australian agricultural exporters, with the Australian dollar likely to depreciate significantly as the market responded to slowing economic growth and rising risk concerns. And this, he says, would “somewhat offset” any fall in global commodity prices when expressed in local currency terms.

Going forward, Mr Hunt says, it will be important to closely monitor developments, including this week’s return to work in China after the extended New Year holiday and how the Chinese government continues to manage the outbreak including restrictions on the food service sector.

“But the most important development will be when we see a slowdown in the rate of infection,” he says. “SARS took around three and a half months for the infection to start slowing but after that, it didn’t take long for infections to cap a few weeks later.

“While we have no idea how this virus will behave compared to SARS, there won’t be any easing of restrictions until it does.”

Mr Hunt says it will also be critical to monitor the spread of the virus to other countries such as Indonesia, Vietnam and other parts of South-East Asia, because if it spreads “we will start to see the same set of impacts in a second very large set of export markets for Australia”.

By Commodity
Rock lobster – likely to be the most exposed sector, with 95 per cent of sales going to China. While rock lobster sales from WA have ceased for now, fishermen can leave the lobsters in the ocean and catch their quota later if quota windows allow.

Read meat – short-term disruption is likely given logistical disruption and reduced eating out by Chinese consumers. The general shortage of protein in China as a result of African Swine Fever is still expected to result in ongoing strong demand from China once the short-term impacts of coronavirus are overcome.

Grains – limited impacts are foreseen both initially and in the event of a second round phase.

Dairy – at this stage, limited first round impacts as most of what is shipped (i.e. powders and infant milk formulas) have a good shelf life and are consumed at home. That said, cheese consumption could be impacted as it is mainly used in food service (for burgers and pizzas).

Sugar – very little disruption is expected to impact sugar trade flows, processing and consumption. But indirectly, the dip in the oil market – associated with concerns on the impact of the outbreak on global growth – could push Brazilian millers to produce more sugar this season which would lead to a softening in global prices, and ultimately, Australian prices too.

Wine – On-premise consumption of wine in China in 2019 accounted for around one third of total wine sales. Sales into this channel are expected to fall in the short-term while restrictions on group dining remain in place. That said, volumes of wine sold via e-commerce are likely to rise as distributors attempt to push more product into, and invest more money in developing, this sales channel.

Horticulture – Fortunately the cherry industry had air freighted most of its crop to China before the virus hit, something that would have been highly problematic a month later. In the next two to three months the main threat to export fruit and vegetable crops will be logistical, with demand from Chinese consumers for quality imported fresh produce not expected to fall from current levels.


Bubs opens corporate headquarters in Victoria

The official opening of the corporate headquarters Bubs Australia Limited was held Friday 13 December at its Australian Deloraine Dairy canning and packaging facility in Dandenong, Victoria.

Danny Pearson, State Member for Essendon, Parliamentary Secretary to the Premier of Victoria, and Gabrielle Williams, State Member for Dandenong and Minister for Prevention of Family Violence, Minister for Women and Minister for Youth in the Victorian Government, signed the Official Certificate of Recognition commemorating Bubs establishing its headquarters in Victoria.

Parliamentary Secretary to the Premier Danny Pearson said: “We were delighted to support Bubs move to Victoria, which will add considerable weight to our reputation as Australia’s gateway to China. As well as creating jobs, this investment is yet another vote of confidence in our farmers and the Government’s work promoting Victoria as an export hub.”

Member for Dandenong Gabrielle Williams welcomed the arrival of Bubs Australia to  area: “Melbourne’s south-east is the heart of Victoria’s manufacturing industry and having Bubs choose Dandenong for its headquarters is important to local jobs and the broader supply chain.”

Commenting on the occasion, Bubs executive chairman, Dennis Lin said: “We are honored by the presence of two state members. Their participation recognises the contribution of Bubs to the state economy.

“Our relocation to Victoria was a vote of confidence in the state, its goat dairy farmers and its strategic position as a key export hub for Australia. We are truly excited that the management operations of Bubs Australia and its strategic supply chain partners are now so close together.”

Bubs Founder and CEO, Kristy Carr said: “We see integrating supply chain, production and management in Victoria as a natural progression which will help bring greater agility and scale efficiencies to our business.

“The move underlines the Company’s recently announced plan to increase investment in boosting cross border e-commerce with China, both for its existing portfolio and new products.

“By expanding the scope of our portfolio to new demographics we expect to generate further opportunities for growth among our Victorian farming partners who collectively represent the largest aggregation of milking goats in Australia.

“These Victorian goat dairy farms, exclusively contracted to Bubs, are capable of providing some 20 million litres of fresh goats milk from an aggregate herd of around 20,000 milking goats.

“Importantly, most of our other Australian based supply chain partners are also located in Victoria. In addition to our Deloraine canning and packing plant in Dandenong, Bega’s Tatura Industries in Victoria provides onestep goat’s milk blending and powder production and Fonterra’s facility in Darnum, also in Victoria, processes our grass-fed organic cow’s milk for packing at the Deloraine facility,” said Carr.

Also present at the ceremony was Mark Edmonson, one of Bubs’ Victorian goat farmers, based in Echuca, Victoria, whose goat farms provide Bubs with important domestic supply of goat milk under an exclusive supply agreement.

Edmonson said that he was very passionate about the goat industry and happy to be doing what he loves – supporting Australia’s Goat Industry which has been a lifetime goal.

“I’m very proud to be one of Bubs exclusive suppliers. With Bubs we now have the guaranteed off-take that gives us the security we need to put this passion into practice. With Bubs support we know we have a partner that understands our business model and how sustainability can make a difference as well as a partner committed to enabling us to have access to skilled, capable people and supporting the gaining of those skills for generations to come.”

China helps Murray River Organics grow

Murray River Organics today announced that exports of its products had increased by 27 percent year to date over FY2019 for the corresponding period and anticipates this trend will continue for the rest of FY2020.

China has been a major contributor to the increase, with sales to Chinese customers more than doubling in FY2020 since the same time last year, as MRG leverages the increasing demand in China for healthy foods.

Chief executive Valentina Tripp said there is more potential for MRG to grow exports to China following MRG’s recent launch on the WeChat platform in October 2019.

“WeChat is a very powerful tool used by more than a billion users each month which enables us to communicate directly with Chinese consumers, build brand awareness and share the Australian Organic Dried Vine Fruit provenance story as the largest Dried Vine Fruit grower in Australia,” Tripp said.

READ MORE: Of seahorses, eczema and organic food

MRG has been able to increase its market share [in Asian markets] with the introduction of its new branded product range across Greater China and South East Asia, which is part of the company’s “Taking Australia to Asia” growth strategy which was launched in 2018.

With ongoing concerns about food safety in Asia MRG believes Australia’s trusted clean and green reputation is also helping it to win new contracts.

The company has also re-entered the European market with high-quality Australian sultanas now being exported into the premium baking industries across Germany and Italy.

Tripp said that global demand for organic and conventional dried fruit remains strong and growing exports has been a major focus for MRG and the industry over the last 12 months.

“We have received significant support from Dried Fruit Australia, with its chairman, CEO and key board member, who are also growers, attending trade shows in China, Japan, Vietnam and Germany. They have been a great support in building international awareness of our high quality Australian sultanas. The feedback from those trade forums was that demand for Australia’s Dried Vine Fruit will continue to accelerate.”

Lessons in mass production

Socrates and his student, Plato, are a perfect example of how good leaders are shaped by observant students. Darcy Simonis, industry network leader for food and beverage at ABB, explains what can be learned from global manufacturing leaders such as China.

China, a leader in mass production, has firm plans to build upon its proud history by investing in the robotics and automation industry. However, because labor is plentiful, mass production is not always automated in China at present. Because China’s working-age population is falling significantly, labor costs are increasing by 15-20 per cent year on year, compared to only 1.6 per cent in the US. This opens opportunities for automation across all economies.

In 2014, the International Federation of Robotics announced that China was buying more robots than any other country each year, partly due to government funds as part of China’s five-year plan to develop intelligent manufacturing. This trend has continued, in 2015 China bought more robots than every European country combined. Generally speaking, Chinese manufacturers are choosing to buy robots from the same global suppliers as other countries, including ABB, despite there being a number of small Chinese robot manufacturers.

READ MORE: ABB awarded unique aquaculture project

“This trend is driven by the Chinese Government´s 2025 initiative to support automation. The country aims to become a leader in automation globally,” explained Joe Gemma, President of the International Federation of Robotics, in February 2017.

Given the clear manufacturing focus in several governments’ foreign policies, including UK and US policy, it’s clear that the progress China is making in automating mass production is something that many countries aspire to. But there is also a clear reciprocal relationship, just as there is with Plato and Socrates, which is allowing countries around the globe to benefit from technological advances.

Mass production became possible because technology and processes evolved to the point that it was not necessary for the majority of workers to be skilled. Three decades of economic growth towards the end of the last millennium was powered by the flow of labor from countryside to city in China. This was a direct result of automation allowing workers to move into manufacturing without retraining from their agricultural background.

Chinese entrepreneurship led to rural inhabitants starting their own manufacturing businesses in the 1980s. To take full advantage of economies of scale, similar entrepreneurs eventually pooled together in production areas and development zones. One good example of this is the city of Datang, where eight million socks are produced each year, one third of the world’s total.

As well as being a thriving hotbed of entrepreneurship, China is also the largest food and beverage market in the world, relying highly on imported goods. In an effort to produce more in the country, China’s 35,000 food processing and manufacturing plants are finding success by using automation in innovative ways. For example, by using automation controlled LED lighting and an innovative growth liquid, Jinpeng Plant Factory outside of Beijing grows up to 15 million seedlings a year in a 14,000-square foot area.

Even in the mass markets of China, automation is being used to great benefit. Reduction in production times, increases in accuracy and repeatability, less human error and increased safety are all benefits cited by Chinese plant managers. However, in keeping with Chinese tradition, automation is being used successfully in innovative, unusual ways to remarkable success.

“What you’re seeing is a really high level of investment in Chinese manufacturing, but most of this is not going to expanding capacity. It’s making the workers more efficient,” explained Andy Rothman, an economist in Hong Kong.

It would be possible to argue that China is the observant student, learning about automation from the rest of the world. Nevertheless, just as Plato was inspired by Socrates, global manufacturing would be wise to pay close attention to China’s progress over the next decade, perhaps the student will quickly become the master.