Productivity Commission’s dairy report findings released

According to a new report from the Productivity Commission, most dairy manufacturing costs are driven largely by market factors as opposed to excessive government regulation.

Last year, the Federal Government instructed the Productivity Commission to compile a report that assessed the cost structures facing dairy product manufacturing businesses in Australia, in addition to identifying areas of cost advantage or disadvantage relative to international competitors, The Weekly times reports.

The report found that while there were certain areas where regulatory amendments by government could be warranted including pricing reforms of electricity markets, the majority of costs are driven by market factors.

Chairman of the Commission, Peter Harris said that research into economies of scale in dairy manufacturing, together with the success of New Zealand dairy cooperative Fonterra were examined.

Harris said that creating a national dairy champion similar to New Zealand’s Fonterra was not feasible in the current climate.

"While the benefits of scale economies can be significant, suggestions that Australia should adopt an industry structure similar to that of New Zealand, with one dominant dairy manufacturer, appear to be based on a simplistic comparison of the export performance of the two countries' dairy industries," the report read.

"The most beneficial dairy industry structure will be determined by the marketplace. Attempts by government to 'second guess' market outcomes to achieve a particular industry structure are fraught with difficulty, and likely to impose net costs on the industry."

Harris said that the report also found that competition from export markets was “fierce” and tipped to increase further "once EU milk production quotas are lifted in 2015”.

“However, there is considerable evidence that dairy manufacturers and farmers are responding effectively to these challenges,” he said.


Arla calls for dairy protein in food aid

Global dairy company, Arla Food Ingredients says that there needs to be a global push from industry to ensure that dairy ingredients are included as an integral part of emergency food programmes.

Arla says that ingredients derived from milk have tended to be omitted from such programmes due to cost concerns, and have decided to commission research into the benefits of whey protein and permeate in a bid to demonstrate that dairy ingredients are affordable and superior due to its dense nutritional profile.

Henrik Jørgen Andersen, senior R&D manager at Arla Foods Ingredients says that by incorporating dairy into emergency food programmes, smaller quantities can be used when compared with alternatives such as vegetable proteins. He also says that dairy ingredients can be blended with proteins of other sources to create food aid products that offer excellent all-round nutrition.

“Even though we are an international business, we don’t operate in every region that benefits from aid initiatives like the World Food Programme. This means the global dairy ingredients industry must stand together to make sure we can deliver affordable high quality products in every geographic [location] touched by these programmes,” said Andersen.

“Consequently, only if other major dairy ingredients companies join us in this effort can we succeed in persuading the organisers of food aid programmes that our products have a key role to play in the war on hunger. It’s a fantastic opportunity for the industry to show that we are not just about commercial success, but that together we can also offer the international community powerful solutions to tacking the global challenge of hunger and malnutrition.”

Andersen says that Arla Foods Ingredients has supported a clinical trial which has shown that it’s possible to make economical, sustainable and nutritionally sound products with milk proteins.

“The full results aren’t yet ready to publish, but we’re confident they will represent a huge step towards documenting the potential role of dairy ingredients as constituents in foods for future emergency aid programmes. However, we can’t do this alone – and we are keen for our fellow dairy ingredients companies to work with us towards this extremely worthwhile goal,” he said.


With a free trade deal Australia can win China’s dairy market

Global demand for internationally traded dairy products is now dominated by China. Although Australia has benefited from this, with annual dairy exports to China now worth over A$500 million, the growth has been much slower than what New Zealand has achieved.

Latest New Zealand statistics to June 2014 show annual dairy exports to China of A$5.05 billion (NZ$6.05 billion). These exports have increased more than tenfold since 2008.

In part, this growth has been because New Zealand has had a free trade agreement with China since 2008. It has not just been the reduction in tariffs that has benefited New Zealand. Chinese companies saw the signing of the agreement with New Zealand as a clear signal their government was in favour of them doing business with New Zealand.

The New Zealand FTA was negotiated in less than three years, whereas Australia’s agreement has taken more than nine years and is still incomplete. The reasons for this are complex, but a key point is that New Zealand’s senior government ministers at that time had China networks going back more than 30 years. Also, in the 1990s New Zealand strongly supported China’s entry to the World Trade Organisation (WTO) when many other countries were less supportive. Subsequently, the bilateral free trade negotiations went remarkably smoothly.

There have also been elements of serendipity in the growth of New Zealand’s dairy trade with China. Chinese consumers have traditionally purchased milk in the form of whole milk powder. Also, since 2008 a shortage of locally produced fresh milk has been substituted with UHT (ultra heat treated) product from locally reconstituted whole milk powder. New Zealand has been the dominant global producer of this product.

Given that global demand for whole milk powder is dominated by China, and the supply side is dominated by New Zealand, there has been a natural coalescence. Other countries, including Australia, have their dairy processing facilities structured for the production of cheese, butter and skim milk powder rather than whole milk powder.

The Chinese demand for dairy products is now broadening. This is just one part of the huge transformation in Chinese society. Key drivers at the consumer level are increasing wealth, urbanisation, changing cuisine, and food safety concerns. The new opportunities are for consumer-ready products produced and packed in overseas countries to overseas standards.

Australia does not need an FTA to prosper from these emerging consumer opportunities. Indeed most of the competition will be from European countries and the USA who also do not have an FTA. But an FTA will undoubtedly help. Achieving the potential will require both capital and vision.

Even without an FTA, Australia has potential long-term advantages over New Zealand with these emerging opportunities. This is because the New Zealand industry, although expert at efficient production of commodities, is not well set up for large scale production of consumer-ready products.

New Zealand’s Achilles heel is that production is seasonal with a huge peak of spring production and almost nothing in the winter. This creates large inefficiencies in processing capacity, and is inconsistent with large scale production of perishable products.

New Zealand’s processing and marketing of dairy products is dominated by the farmer co-operative Fonterra. Quite simply, Fonterra has no available mechanism within its co-operative structure to acquire the capital that would be needed to transition from a commodity dominant focus to a fast moving consumer goods focus.

Safety opportunity, logistics challenge

Chinese consumers are particularly concerned about food safety. They do not trust their local companies, and seek products of guaranteed provenance produced and packaged in Europe, America, Australia or New Zealand.

Middle class Chinese spend nearly half of their leisure time online. They quickly surf the net to see whether or not products sold in China are the same as sold in other countries. China now requires Chinese language packaging, but apart from that, Chinese consumers want to know the product is identical and meets foreign regulatory standards.

One problem for Australian companies will be the complex logistics of distribution in China. In general, the supermarkets do not have centralised warehousing and distribution systems. Accordingly, without well-placed local partners, market penetration is a major problem.

Fortunately there are solutions. The key one is the use of online marketing. However, it is only the major brands that can make this work. The other option is for a diverse group of food companies, covering the spectrum of products, to market online together. That way, Chinese consumers could purchase all of their “Australian food baskets” from one source.

American UHT milk in a Beijing supermarket (2011), priced at $A7.90 per litre. Author

A number of Australian companies are currently developing markets in China for fresh chilled Australian milk. This will be challenging. The bigger opportunity is for UHT milk which has a shelf life of over six months without refrigeration. In Australia, UHT milk is widely regarded as an inferior product, but the Chinese do not see it that way. I have seen UHT organic milk from California selling for 42.9RMB (A$7.90) a litre in top-end Beijing supermarkets.

China’s dairy industry has its own challenges

The Chinese dairy industry itself is undergoing major change. The small dairy farmers are going out of business. In part this is because of a shortage of labour in the villages. The old farmers are retiring and the next generation is moving to the cities.

The new Chinese dairy industry is based on American style mega farms of 3000 to 5000 cows, with all the cows housed and fed with what is known as a “total mixed ration”. Under this system, the cows produce twice as much milk as pasture-fed cows in Australia and New Zealand. The big challenge is to obtain the feed at a reasonable cost. A lot of the hay is imported from the US.

Chinese dairy farmers receive prices for their milk that are close to twice that which New Zealand and Australian farmers receive. Local Chinese language industry sources are currently reporting farm gate prices of 4.3 RMB (A79c) per litre for average quality milk and at least 5 RMB (A91c) per litre for good quality milk. Despite this, Chinese colleagues report that dairy self-sufficiency has dropped from 95% to 78% since 2008. This creates great opportunities for Australian companies to produce cheese, UHT milk, and infant formula within Australia, then put it on a slow boat to China, and still be price competitive.


There are also considerable risks. Developing consumer awareness of Australian brands will be capital expensive. Also, the Europeans, and particularly the Germans, are there already. In the six month period to 30 June 2014, China Customs report that 142 million litres of fresh and UHT milk were imported into China. Forty percent of this came from Germany.

The perceived opportunities are so great that everyone is going to be there competing for market position. Many will get crushed in the rush. Only those who have either scale or a genuine differentiated product will survive. In amongst this, understanding China will also be critical.

Many will make the mistake of focusing on the Tier 1 cities of Beijing, Shanghai Guangzhou, and Shenzhen. This is where the competition is greatest. It should never be forgotten that China now has more than 150 cities with more than one million people.

The Conversation

Keith Woodford does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.

Peter Lehmann Wines reports strong growth

Peter Lehmann Wines has nearly doubled its profit over the last year due to strong local sales and a growing business in China.

Peter Lehmann has recorded its second consecutive full-year profit, but has warned a string of small vintages could put a brake on profits, The Australian reports.

Documents lodged with the Australian Securities & Investments Commission show Peter Lehmann posted a full-year profit of $754,000 for 2013-14, up 76 percent. Sales were up 13 percent to $47.9 million.

Despite a pullback in consumer spending this year, Peter Lehmann Wines said that domestic revenue increased 39 percent to $22.8m.

“We are reviewing our strategies in the US, and we have made significant changes to our distributor network in Canada to address these issues,’’ Peter Lehmann chairman Christoph Ehrbar said in his report to shareholders.

An overhaul of its route into China bolstered sales at a time when a corruption crackdown and austerity drive has hurt sales in the region for other winemakers. “Albeit early, this change has already started to yield results with sales up 105 per cent versus the previous year,” Ehrbar said.

Ehrbar warned that historically low vintages in 2012, 2013 and 2014 meant costs would rise with no bulk wine available for sale. Peter Lehmann plans to grow its revenue base while addressing costs by better sourcing and supply strategies, which should benefit increased profit in two to three years.


Bar set low for a ‘do no harm’ China-Australia FTA

Recent public comments of senior Australian government ministers suggest they are increasingly confident a free trade agreement with China will be concluded by the end of the year.

For its part, Beijing has also offered hints an agreement will be reached within the same time frame. The speculation is a grand signing will take place in mid-November when Chinese President Xi Jinping will be in Brisbane for the G20 meeting.

Given that governments from both countries have staked their credibility on such a schedule, it is more likely than not pen will be put to paper next month.

But the significance of an Australia-China FTA is at least as much about diplomacy as it is about economics. The reality is that the Australia-China economic relationship does not really need an FTA to flourish. Agreements on all access in various sectors are concluded constantly without need for it to be part of a grander sounding FTA. Meaning the excitement behind the likely conclusion of an agreement will exceed the actual significance of such an agreement.

Bored into agreement

Let’s begin with what an FTA actually is. Rather than comprehensive economic agreements covering broad aspects of one’s economy, they tend to end up as rather piecemeal agreements covering specific sub-sectors that negotiators chose to target. Additionally, rather than expressing a broad meeting of minds, philosophies and policies between two economies, they contain extremely detailed provisions.

For example, there might be something about “processed dried stone-fruit” attracting a lower tariff than “semi-processed dried stone-fruit” with appendixes indicating what “processed” and “semi-processed” means, what constitutes a “stone-fruit”, what proportion of the product has to have dried fruit in its ingredients for it to be classified as “dried fruit”, and which stone-fruit are excluded from the provisions etc. It is no wonder that trade negotiators tend to admit the side that becomes bored first tends to lose.

Moreover, when one signs an FTA, especially with China, they tend to be treated as much as political and diplomatic agreements as well as economic ones. In this context, the Tony Abbott government has understood the “me too” mentality in Northeast Asia and played intra-Northeast Asian jealousies well. With Australia having signed FTAs with Japan and Korea, China pushed its own negotiators to fast-track an agreement with Australia.

Foreign investment thresholds

However, since Beijing needs the FTA for political and diplomatic purposes, it will want the appearance of a breakthrough in China-Australia relations. This will come in the form of China insisting that no Foreign Investment Review Board (FIRB) process is required for Chinese investment into Australia under one billion dollars, whether this be investment by Chinese state-owned-enterprises (SOEs) or private firms.

Such a threshold has been applied to Japan and South Korea under Australia’s FTAs with those countries. As China wants the FTA to demonstrate that it too has a special economic partnership with Australia, even if there are strategic and political differences, Beijing will insist on being treated the same as other Northeast Asian neighbours in this context.

For Australia’s part, this was always only really a political sticking point that Canberra will likely relent on. As surveys such as the annual Lowy Institute Poll demonstrate, there is widespread public suspicion of Chinese foreign direct investment (FDI), most of it being undertaken by state-owned enterprises, even if the reasons for such suspicions are not well formed or articulated. In opposition, Abbott appeared to share some of these fears. But in government, his tone seems to have changed. After all, FDI entering into Australia still has to play by Australian rules and follow Australian laws and regulations.

The reality is that the vast majority of Chinese FDI applications into Australia have been approved over the past decade, despite some high profile knock-backs. All indications are the Abbott government will accommodate Beijing’s insistence to raise the threshold to one billion dollars knowing that almost all Chinese FDI applications would have passed the FIRB test in any event. Besides, Canberra will be happy to reduce this hurdle for Chinese firms since FIRB is only an advisory body, albeit an influential one, and the relevant minister can still knock back FDI applications on national security or other grounds.

In return, Australia will receive better access to the Chinese domestic market for our diary and agricultural goods, but this would have occurred in any event without an FTA since provincial governments in various Chinese markets have been agitating for high quality imports in these sector and would have formally and informally made it possible for Australian firms to more easily access those provincial markets.

When it comes to Australian access to the services markets such as legal and financial, we are likely to receive some concessions. But the real barriers to entry in these Chinese markets are local ones at the regulatory and social levels, and an FTA will not reduce these barriers.

The bottom line is that both countries want an FTA for diplomatic reasons. The major, headline concessions that both sides will offer carry few costs to the conceding country, would have occurred in any event, or were already happening in practice. If the acceptable standard is that an FTA should “do no harm” at the very minimum, then that low threshold will be met in November.

The Conversation

John Lee does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.


Organic poultry producer to re-enter Asia

Australia's largest organic poultry producer, Inglewood Poultry Farm, is preparing to re-enter the Asian market.

The company, which is a subsidiary of RM Williams Agricultural Holdings, entered into receivership last year, and reportedly owed around $60m to the Wespac Bank.

Inglewood Farms has since been bought by the Youngberry family, who have since worked to re-establish trade links into Hong Kong, ABC Rural reports

Inglewood Poultry Farm CEO Katrina Hobbs told the ABC’s Queensland Country Hour that developing niche markets is the way into the Asian market.

“We are quite small when it comes to feeding somewhere like China,” Hobbs said.

“We need to look for niche markets that we can handle and we need to look for the right partners and build the relationships.

“It's not about profiteering from one deal, it's about the future.

“We need to have a long term view.”

Hobbs said chicken portion exports to Hong Kong will complement the local side of the business.

“We're looking to send product very shortly.

“They're looking for the wings and the thigh meat.

“In Australia, we tend to have more of a demand for the breast so it's great to have a utilisation of the carcase.”


Shepparton Pactum Dairy site to expand

Freedom Foods Group has announced it has entered into an agreement to acquire land adjacent to the Pactum Dairy site in Shepparton Victoria.

The company will acquire approximately 77,400 square metres of land and the acquisition price is approximately $4 million, but is subject to final adjustments.

Freedom Foods managing director, Rory Macleod said the land provides capacity and flexibility for longer term warehousing and distribution requirements for the Pactum Dairy operation. He said the existing warehouse capacity on site and adjacent to the site is insufficient for long term requirements.

Additional warehouse capacity will provide space for future expansion of processing and packaging operations at the site and potential expansion of any other dairy processing capabilities in the future.

The $45m UHT dairy beverage facility opened in May, after a strategic supply agreement was announced between Shepparton based Pactum Dairy Group and China’s Bright Dairy, in April.

Production for China began in August, with production of U+, the first Australian based high quality dairy product manufactured for a major Chinese dairy company under its own brand.

Detailed planning for construction of an integrated warehouse and distribution facility is expected to begin during 2015 and final settlement will occur in September 2015.

It’s expected that the plans will be funded from existing finance facilities and other assets.


State of the Industry report released

The Australian Food and Grocery Council (AFGC) has released its annual State of the Industry Report, shedding light on key issues such as industry turnover, employment and international trade.

This is the sixth edition of the State of the Industry Report, which provides a comprehensive report of the food and beverage manufacturing industry’s turnover, employment, international trade, capital expenditure and research and development.

It uses data from the Australian Bureau of Statistics as its primary source, and where data from 2013-14 isn’t available, findings from 2012-13 are used.

The Report found that the Australian food and beverage, grocery manufacturing and fresh produce industry had a total turnover of $114 billion in the 2012-13 financial year. Food and beverage processing contributed $91.6 billion, grocery $16.2 billion and fresh produce $6.2 billion.

Meat and meat product manufacturing continues to comprise the largest share of the total sector turnover, at 24.6 percent, despite contracting slightly (0.7 percent in 2012-13). Dairy product manufacturing was the second largest at 14.7 percent, increasing 9.1 percent. Seafood processing comprises the smallest share of the total sector turnover (1.2 percent), with a decline of 4.2 percent.

The fresh produce sector recorded a turnover of approximately $6.2 billion in 2012-13, representing an increase of 12.3 percent on the previous year. The vegetables category and the tropical and other fruits category, which includes nuts, bananas and berries, contributed the most to the growth, increasing by 10.6 and 22.5 percent respectively, due to recovery from adverse weather conditions.

The food and beverage, grocery manufacturing and fresh produce industry represents 28.9 percent of the total Australian manufacturing industry by turnover.

Employment decreased slightly, down 2,571 or 0.9 percent from the previous financial year. In 2013-14, the industry employed approximately 299,731 people, down from 302,302 in 2012-13.

In regards to the number of businesses in the industry, in the 2013-14 financial year there was an estimated 27,469 businesses, 183 fewer than in 2012-13. The vast majority of these businesses were in the fresh produce sector (18,609 businesses), while grocery manufacturing has 1,353 businesses and food and beverage manufacturing has 7,507 businesses.

“Turnover is up slightly but job numbers are down. This is a microcosm of the broader economy – growth is below trend and unemployment is creeping higher,” said Terry O’Brien, chairman of the AFGC in the Report’s foreword.

“In the food and grocery sector, the juxtaposition of growth and declining employment reflects the reality of companies automating to reduce labour costs and drive higher efficiency and productivity.”

In 2013-14, Australia’s total international trade (exports plus imports) increased by 7.3 percent to $55.9 billion.

The real value of industry imports increased by 6.1 percent, while industry exports increased by 8.6 percent (from a smaller base). This resulted in a contraction of 20.9 percent in overall trade deficit to $1.8 billion in 2013-14, with total imports in 2013-14 valued at $28.8 billion, and exports valued at $27 billion.

In 2012-13, food and beverage, grocery and fresh produce exports accounted for 21.3 percent of total industry turnover. During this period, 86.8 percent of all fresh produce grown in Australia went to the domestic market.

The Report quotes the weakening of the Australian dollar and growing global demand, particularly in processed meat, seafood and cheese and other dairy (exports grew by 24.5, 23.1 and 19 percent respectively), as the key drivers for strong export growth.

Australia’s top 10 trading partners for the industry remained the same in 2013-14 as in the previous year, with the US our largest overall trading partner and also surpassing Japan as Australia’s largest export market. Japan imported 21 percent of Australia’s meat products and dairy products in 2012-13. The US was the largest importer of wine and other alcoholic beverage products from Australia in the same year.

The US and New Zealand were the top two supplier countries for imports into Australia. Imports of fresh produce from New Zealand grew by approximately 60 percent from 2012-13.

The 2013-14 fresh produce figures indicate there has been a 23 percent increase in imports of fresh produce.

Capital expenditure and R&D
According to the State of the Industry Report, the food machinery manufacturing industry provides a proxy for the level of capital expenditure by the food and beverage industry.

It is estimated that the food processing machinery manufacturing industry revenue grew from $965 million in 2007-08 to $1.09 billion in 2012-13, a compound annual growth rate of 2.4 percent. However, the industry has been subject to fluctuations over time. For example, growth of 6.4 percent in 2010-11 followed revenue declines of 0.2 and 2.6 percent in 2007-08 and 2008-09 respectively when the global recession took its toll on demand for machinery and equipment.

Revenue is expected to grow at a compound annual growth rate of 0.6 percent over the five years through 2017-18 to a total of $1.12 billion. The forecast growth rate is based on observed trends such as increasing technological advancement, higher automation, downstream price increases, economic recovery over the next five years, introduction of new products and consolidation required in the industry to make new technological investments economically viable.

Capital investment in the food, beverage and tobacco product manufacturing industry flat lined at $3.1 billion in 2012-13 increasing only by 0.3 percent from 2011-12.

In 2011-12 the total amount spent in the food and beverage sector on research and experimental development was $541.8 million, an increase of 5.4 percent. The sub-sector with the largest expenditure on R&D was the dairy product manufacturing sector ($109.3 million), followed by meat and meat product manufacturing with $95.9 million. Significant growth was recorded in the sugar and confectionery manufacturing segment where estimated R&D expenditure rose by 56.1 percent from $26.7 million to $41.6 million, while most other segments recorded a decline over the same period.

Food supply management centre to be established

The University of Sydney will partner with brands including Coca-Cola Amatil and SunRice to establish a research centre focusing on maintaining a sustainable food supply to our domestic and export markets.

The Training Centre for Food and Beverage Supply Chain Optimisation will operate in cooperation with the University of Newcastle, the CSIRO, the Georgia Institute of Technology and the NSW Department of Primary Industry, and industry partners will include Coca-Cola Amatil, SunRice, the Batlow Fruit Co-operative and Sanitarium Health and Wellbeing.

The University of Sydney Business School’s Institute of Transport and Logistics Studies is establishing the centre, and its chief investigator, Associate Professor Behnam Fahimnia, said a cost effective supply chain is essential if the food industry is to become more sustainable and competitive on the world stage.

“The key to survival is logistics excellence with a focus on the delivery of products to the right customer at the right time,” Fahimnia said. “One of the big challenges is size. Coca Cola Amatil, for example, has 35 production lines, 14 primary distribution centres and over 125,000 delivery points.”

“The rice industry generates a large volume of waste products in the form of rice hulls which are either buried or burnt,” he said. “This waste could be converted into energy in the form of electricity.”

Fahimnia is now looking for three PhD students to join the centre and work on supply chain design and management projects in close collaboration Coco-Cola Amatil and SunRice.

The Training Centre for Food and Beverage Supply Chain Optimisation is being funded with a substantial grant from the Australian Research Council.


Wheat exporter’s code of conduct released

A mandatory code of conduct for wheat exports has been released by the Federal Government, and will be in place by 1 October.

In a joint announcement, the Minister for Agriculture, Barnaby Joyce, and Minister for Small Business, Bruce Billson, said the code will “give exporters of bulk wheat fair and transparent access to port terminal services,” ABC Rural reports.

Joyce said the code of conduct is necessary to support the $6.8 billion wheat export industry.

“After consulting widely with industry, we made some changes to address potential concerns,” he said.

“The code now ensures the level of regulation on port terminal operators is fit-for-purpose and won't impose an unnecessary regulatory burden on the industry.”

The code of conduct will be monitored and enforced by the Australian Competition and Consumer Commission (ACCC).

The code of conduct will be subject to a review in three years' time and another review three years later if it remains in place after the initial review. 


Meat processor signs breakthrough contract with China

Bindaree Beef has signed a major new contract to airfreight shelf ready beef cuts to supermarket chains in China.

The contract was signed today (18 September) in Shanghai by Tim Sullivan, China manager for Bindaree Beef, who is participating in a trade mission with Minister of Agriculture Barnaby Joyce.

It builds on an existing agreement in which Norco established a supply chain for distributing fresh chilled Australian milk to supermarkets in major Chinese cities, including Shanghai, Beijing and Guangzhou.

Bindaree is taking beef cuts that have traditionally been used in the manufacturing of hamburger patties in the US market and selecting, preparing and packaging individual cuts that suit the palate of affluent urban Chinese consumers for traditional style Chinese cooking.

“The opportunity to cut, pack and price label beef to go directly on the shelves is a wonderful value adding opportunity to supply niche customers in China, which is exactly where Bindaree needs to fit in the supply chain,” said Sullivan.

“What Bindaree needs to continue to do is identify and work with the right players in the market place to deliver a premium clean green product with full traceability, and our HAACP and Food Safety procedures in Australia are the best in the world to deliver that.”

JR McDonald, chairman Bindaree Beef, added “Bindaree Beef would like to congratulate and thank Minister of Agriculture, Barnaby Joyce and Minister of Trade Andrew Robb for proactively working to grow our trade with China. We believe the work we are doing to develop these opportunities will deliver benefits – especially by creating jobs and supporting a sustainable beef cattle industry – that will reward their efforts," he said.


Beekeeper joins NASAA to drive organic certification

Beekeeper and former grazier Peter Hastie has joined the National Association for Sustainable Agriculture, Australia (NASAA) as industry liaison officer.

Hastie’s role at NASAA will see him charged with developing the organic, biodynamic and sustainable agricultural industries across Australia.

Formerly managing livestock grazing operations in NSW and the Northern Territory, Hastie established and ran a small localised food hub out of New England and ran his own property valuation business. He is now an organic beekeeper and an artisan produce enthusiast.

He is also a member of Biodynamic Agriculture Australia and is an ex-vice president and founding member of the not for profit Mano River Sustainability and Development Association (MRSDA).

Hastie’s role will be to work with all sectors of Australia’s organic industry, to educate industry and consumers on organic, biodynamic and sustainable agricultural practices, and to assist operators to gain organic certification. He replaces Alex Mitchell who resigned in 2013.

“I’m passionate about the development of sustainable agricultural production and natural resource management,” Hastie said.

“I look forward to learning a lot and to developing opportunities that strengthen and grow Australia’s organic and biodynamic industry.”

The appointment comes after 12 months of internal restructuring to refocus NASAA on growing domestic and export opportunities for Australian organic produce, particularly in Asia.

In August 2014, NASAA made history with one of its inspectors approved to inspect to Chinese regulations, the first person outside of China to receive this level of accreditation.


Chinese groups invests $3 bill in Australian agriculture

Two Chinese investment groups have established a $3 billion fund to invest in Australian agriculture.

The fund, known as the Beijing Australia Agricultural Resource Cooperative Development Fund, is a joint partnership between state-owned Beijing Agricultural Investment Fund and the Shenzen-based Yuhu group, ABC Rural reports.

It will focus on supplying produce to China, in particular infant milk formula, beef, lamb and seafood.

Australian trade minister Andrew Robb said it's a strong signal from the country's largest export market for agricultural produce.

"It's a great signal that the Chinese investors are looking, in a fairly significant way, to position themselves in Australia, and they are doing it in a sensible way," Robb said.

He says negotiations on a free trade agreement with China are progressing and he's confident a deal can be achieved by the end of the year.

"These things are very complicated. There are, for instance, 11,500 individual tariff lines that have to be negotiated. A lot of that work is done.

"But as always, with any negotiation, the really big important issues invariably end up in the final stages of the negotiations.

"So whilst we've been talking about it and have got a sense of where one another hopes to be, in many cases we haven't finalised the very critical issues."

Robb has given Australian dairy farmers an assurance that he is aiming to get them an equal footing with their New Zealand competitors, who finalised a free trade agreement with China several years ago.

Agriculture Minister Barnaby Joyce is currently in China with the message for Chinese farmers that Australian imports are not a threat and has been playing down the notion of Australia becoming “Asia’s food bowl”.


Australia won’t become “Asia’s food bowl”: Joyce

Agriculture Minister Barnaby Joyce has arrived in China with the message for Chinese farmers that Australian imports are not a threat.

The issue remains a key stumbling block to the coveted free trade agreement between the countries, the Sydney Morning Herald reports.

"We are not a threat," Joyce told reporters in Harbin, the capital of Heilongjiang province, a major agricultural hub in China's north-east.

"The people of China can rely on the fact that Australia doesn't have a hope in Hades of feeding the whole of the Chinese population – not even a portion of it."

Joyce has focused on Australia’s role as a producer of premium quality agricultural produce in recent weeks, straying away from the “food bowl of Asia” notion.

The Chinese government in particular is concerned over the impact of an increase in Australian beef on its local market.

Touring the city's iconic Harbin Brewery, which was founded in 1900 and now uses Australian barley in its brew, and the Tianshunyuan meat processing plant, the largest importer of Australian sheep meat, on Monday, Joyce said even if Australia doubled its agricultural output it would still only be enough to feed 120 million people, a fraction of the populations of key neighbors China and Indonesia.

The dairy industry would benefit greatly from a Free Trade Agreement (FTA), with milk selling in China for as much as $8 a litre.

The Australian Dairy Farmers’ (ADF) selfie campaign, recently ran a social media campaign aimed at generating support for a FTA with China, which reached over 1.6 million Twitter users.

On Monday (1 September), Australian Dairy Farmers called upon Australians to upload a #FTA4dairy ‘selfie’ holding a sign incorporating the #FTA4dairy hashtag and a positive message about the China FTA.


Australian Organic pushes for China

Australian Organic has appointed a new trade ambassador and facilitator to get organic products into the Chinese market.

The newly appointed Jessica Rudd will use her knowledge of China to help move organic products into China.

Rudd has spent the past five years living in Beijing and says she was often frustrated with the lack of availability of certified organic goods from Australia.

Chinese consumers are increasingly drawn to clean, green, safe imports.

“The Chinese government is doing a great job of lifting people out of poverty and consumers spend big on their children,” Rudd said.

“I’m honoured to be invited to use my China story to help Australian businesses, big and small, taking advantage of the potential for growth into that market. I want to see my Chinese mates gaining access to the fabulous range of high-quality products our country has to offer.”

Australian Organic commercial manager, Joanne Barber, said organics is big business in China.

“China has 1.3 billion people. One certified organic home delivery company there has a customer base of over 400,000 families.

“The biggest barriers to exporting to China are the language and cultural differences.”

Australian Certified Organic already offers certification through China’s most well-known and respected certification company, the Organic Food Development Center (OFDC), and it’s carrying out the first round of audits for Chinese certification in September.

Next month Australian Organic is running Organic Awareness Month, which aims to encourage consumers to purchase at least one certified organic product, and to promote the benefits of organic consumption and production.

Running from 1 to 31 October, the campaign will be split into four sectors:

  • Allowed inputs 
  • garden and farm
  • Organic skincare and cosmetics
  • Organic beverages 

Organic food producers and retailers from each sector will be profiled and their products promoted on a Facebook page. Consumers will be invited to participate in Q&As with certified organic farmers, retailers and Australian Organic ambassadors (chef Pete Evans and There Kerr), as well as participate in a Vote to Win style competition.


Beelgara Wines head to China

Wine Insights has granted Manassen Foods Australia the right to exclusively market, promote and sell Beelgara Wines in China.

In the lead up to the signing of the agreement, Wine Insights worked with Manassen Foods and their parent Bright Food Group for over twelve months to develop a range of Beelgara Wines for Chinese consumers.

Managing director of Wine Insights, Peter Toohey, said “we believe this collaborative approach will underpin the brand’s success in one of the world’s largest growing wine markets. It is our intention to work closely with the Bright Food Group to build the Beelgara brand into one of the top five Australian wines sold in China over the next three years.”

Under the terms of the agreement, Beelgara will sell directly to Bright Food in China, with Bright Food taking the Beelgara wines to market through its distribution business, ‘Joymax’ and Manassen Foods will market and promote the brand through multiple distribution channels.

Geoff Erby CEO with Bright Food Group Holdings, Manassen said “consistent with Manassen’s track record in successfully expanding imported citrus markets in China, it is a natural progression for us to now focus on supplying the burgeoning Chinese wine market. With the weight of the Bright Food Group underwriting our push to promote Beelgara wines, we are confident that the brand will have immediate sales traction.”


Beefing up meat exports

We all know it: Australia’s ‘clean, green’ reputation overseas gives our food and beverage products a serious competitive edge, and the meat industry is harnessing it to boost exports. By Danielle Bowling.  

By and large, Australian consumers like buying Australian products because they trust the processes involved in their manufacture. Campaigns like Australian Made are built on the premise that there is a real appetite in retail for locally produced products, and that manufacturers will benefit greatly from clearly communicating – both here and abroad – that they are True Blue.

Of course overseas markets also show keen interest in certain Australian products, especially food, and Meat and Livestock Australia (MLA) is taking full advantage of it with the launch of its True Aussie brand position and identity.

Officially released at trade shows in China and the US in May, the True Aussie logo will be used for lamb, goat and beef in all export markets. Previously, these three red meats were marketed under different logos in different regions, but Stephen Edwards, Business Manager of global marketing at MLA, says having them come together under one umbrella brand will make promoting Australian meats overseas easier and more consistent.

“It’s something which we’d been discussing for a while and something which our stakeholders had asked us to look into, which we obviously did. We went through a lot of consumer insights into what people believed Australian beef and lamb was all about,” he told Food magazine.

As a result, the True Aussie brand position and logo were created, and it’s based on the three unique selling points of Australia’s agricultural and food manufacturing industries.

“[Firstly], we believe Australia is the ideal home to be raising cattle and sheep. The second part is about trusted partners. So trusting the producers, the farmers of Australia, that they have good sustainable practices in place; they raise animals with animal welfare in mind – there are industry standards that back that up, all the way through to the end user who uses the products, that is, chefs and butchers. So we’re just celebrating how good our supply chain really is, and it really is second to none in the world.

“And the third part of it is pure enjoyment, not only of the product, but when you buy a piece of Australian beef or lamb in an overseas country, you’re really buying into the Australian thing as well,” he says.

Edwards admits that MLA wasn’t convinced on the use of the word ‘Aussie’ until its due diligence process indicated that export markets associate the word with reliability, quality and food safety – pillars which the local manufacturing industry prides itself on.

“We saw that there was a lot of recognition for the word ‘Aussie’, and when we first saw it we weren’t all that enamoured with it, mainly because I think the word ‘Aussie’ has different connotations for Aussies, but when you go overseas you see that Americans, Japanese, they see us as Aussies, and they see us as straightforward, honest, laid back people and I think that’s what we wanted to portray.”

The True Aussie logo is being rolled out in all export markets and is already being used in two of the largest retailers in Japan.

The rollouts are being supported by regional specific strategies, depending on the export market and there’s also room underneath the logo to insert a tagline that ties in with the region and the needs and/or values of its customers.

“We have the highest standards of traceability and food safety in the world and that, in some regions, will dial up different messages. In emerging growing markets like South East Asia and the Middle East, they’re very keen on knowing where their products come from. Especially somewhere like China, where everyone sees the amount of food safety issues they have, simply because they don’t have the infrastructure in place. So when they look at food, they want to know where their product comes from and they want to know that it’s a safe product. When they talk about Aussie products, they know it’s Australian, it’s safe; it’s sort of a given now. So we need to keep reminding people that that is the case,” says Edwards.

“In other markets it’s just as important, like in Korea and Japan, but we’ve got to dial up different attributes there; we’ve got to dial up that it’s a high quality product, it’s good tasting, good for you and that there are nutritional benefits there too.”

Capitalising on interest from China
The logo will be rolled out in China like it will in all other export markets; it’ll actually be a little easier there, Edwards says, because “we kind of have a clean slate” in China, with no pre-existing recognised logos.

Despite this, China is a fairly new growth market and MLA has plenty of work to do in the region. The government is pushing for a Free Trade Agreement, and Edwards says that now that FTAs have been achieved in Korea and Japan, China is the top priority.

“The beef and sheep meat industries are working very closely with the government to ensure that if and when we do get an FTA, not only do we have good market access as far as elimination of quotas and tariffs, but we also have the ability to demonstrate our food safety credentials and make sure that we lessen the risk of any technical barriers. For example, they might say we can’t bring chilled products in, and we need to make sure the Chinese government is across exactly what our industry can deliver.”

Edwards is confident that the True Aussie logo will be used on all meat products, although there was a push for it to only be used for top quality products like high quality grass fed and high quality grain fed beef.

“If you look at a box of trimmings, they could go into making hamburgers or meatballs or bakso balls in Indonesia. You want that [logo] on the carton, and there are quite a few exporters now who are looking to put the True Aussie logo on their cartons because even though it’s a commodity product, you’re still competing with the likes of Brazil and the US, so you want to make sure that people see that it’s an Australian product, and straight away they know it’s safe and it’s a good, clean product.

“In my opinion it doesn’t matter where your product [is positioned], you still want to make sure that people know it’s Australian,” he says.

The opportunity that China represents to Australian producers has definitely surged over the past two years or so, Edwards says. This is due to a number of factors, including the region’s diminishing herd size, with a growing number of Chinese people moving away from rural areas to pursue opportunities in manufacturing.

Consequently, there is a growing middle class in China, and they’re earning more money. “When you look at the rise of the middle class in places like China and the Middle East, you note one thing: when the middle class in Australia gets a bit more disposable income, it’s ‘I need a new TV’ or ‘I need a new car’. When the middle class in those emerging markets gets a little bit more money, they want to eat better, and their staples are chicken and pork, which are quite cheap proteins. We’ve done a lot of market research, and beef is seen to be the king of proteins in those regions of the world, so they aspire to be eating those proteins. They want to eat more beef and, a) because China has a lot of food safety issues, and b) because the herd is diminishing, they need to import a lot more products.

“So it’s been a boom not only in China, but also in the Middle East. Exports for beef and lamb have gone through the roof in those areas,” says Edwards.

Just a few months ago in August, V&V Walsh, a West Australian meat processor, signed a deal worth an estimated $1 billion with China’s Grand Farm. The five year agreement is between the Bunbury company, the Inner Mongolian government and China's Grand Farm, which is the region’s largest red meat importer, despite only supplying one percent of the Chinese market (the ABC reports it aims to increase this to three percent).

While not all dealings with China will be on the grand scale of that between V&V Walsh and Grand Farm, Edwards is urging local manufacturers and meat processors to make the most of growing export opportunities by being as visible as possible at industry events and trade shows.

“There’s a lot of enquiry coming out of China. Our Beijing office is getting inundated with calls from people wanting to import Australian beef or lamb … There are a lot of trade shows happening in China, and not only in China, there are a lot of Chinese buyers going to different trade shows around the world. We’re seeing a lot of Chinese buyers and importers travelling to trade shows to find products they can import. So it’s very important, I think, for MLA to facilitate trade events with exporters so we can be seen out there under one banner and that umbrella brand of True Aussie,” he says.


Farmers look to a second Cootamundra abattoir

With the Manildra Meat Company heading towards export, NSW farmers are looking into a second Cootamundra abattoir for the domestic market.

The Cootamundra abattoir had a change in ownership earlier this year, and moved to a full export accreditation, which has some farmers looking at alternative processing sites, ABC Rural reports.

They're investigating the viability of either moving business elsewhere, or building their own multi-species abattoir in the New South Wales south-west slopes.

Cootamundra farmers David and Mary Booth, who run Buronga, an organic livestock and grains enterprise about 16 kilometres from Cootamundra recognise export lines at the abattoir would be given priority over their kill space.

“Short term we've still got a place there, but long term there's just not enough room for smaller people like us, smaller farmers,” he said.

“Their operation is going to major export and they'll want to control of either larger numbers or own everything that goes in and comes out of the abattoir.

“It's great for the town, Manildra are spending a lot of money there now and there's a lot more certainty with the abattoir, but I suppose we've got to find somewhere else.”

He said Cootamundra Shire Council has indicated there's appropriate industrial land to develop a second abattoir in the town.

Manildra Meat Company in Cootamundra told ABC Rural in a statement it will continue to offer operators the services of its plant on commercial terms that are appropriate for the operation of the business.


Kangaroo meat exporter fed up with Russia

Australia's biggest kangaroo meat exporter said numerous bans from Moscow in the past four years have crushed the kangaroo meat industry.

General manager of Brisbane's Game Meat Processing, Rex Devantier said the bans have shrunk the kangaroo industry to about a quarter the size  it was four years ago, the Sydney Morning Herald reports.

The most recent ban from Russian president Vladimir Putin includes a range of Western food products in retaliation for similar sanctions over Moscow's support for rebels in Ukraine.

While these sanctions have little direct effect on most Australian businesses, with total trade with Russia worth about 0.3 percent of all exports, it has been a key market for some companies.

“If Russia came back tomorrow, we would not desert the European market,” Devantier said.

“[Russia is] too fickle. If our plants are running at capacity we are employing over 350 people, so you can't turn that off one week because someone says they don't want it and three months later they do."

Devantier's company processes about 800,000 kangaroo carcasses a year, more than 500,000 of which are sent overseas.

He said about six years ago, Russia appeared a promising export market, buying about 40,000 tonnes of kangaroo meat a year.

“In the past when kangaroos had access there, there wasn't a quota. So they were able to consume relatively large volumes of kangaroo meat.”

Kangaroo was popular in Russian sausages and salami type products because of its low fat content, but despite its appeal among Russian consumers, Moscow slapped several bans on kangaroo meat exports, which were worth about $180 million in 2008, after finding unacceptable levels of E.coli bacteria.

Doug Jobson, the general manager of Adelaide-based Macro Meats, said the Russians were using the wrong testing protocols for the meat, which he said passed Australian and European Union standards.

Jobson said the suspensions were politically motivated and did not only target kangaroo meat. 

The Kremlin also banned beef exports in May, claiming it had detected growth hormones.

“It's a matter of fact that it [the hormone] wasn't used. The US is having same issue,” Jobson said.

“It just seems a lot more political than other markets we deal with.”

The Australian beef industry and Agriculture Minister Barnaby Joyce dismissed Moscow's hormone claims at the time, saying the tensions over Crimea were more likely to blame.

“It's like saying 'oh we found roses growing wild in the hills'," Mr Joyce said at the time. "Well you might have, but I doubt it.”

Beef was Australia's most lucrative export to Russia, worth about $159 billion a year, ahead of dairy which was worth about $112 million.

But meat processors are confident they'll find another home for the products.

Devantier said Germany, France and Holland were key export markets, and the kangaroo meat industry was hopeful of striking a deal with China, which had the potential to be a “far greater market” than Russia.

“We would be able to sell our complete production to China … for as long as I could see in the future,” Devantier said.

“We've had our plant audited twice by Chinese authorities and passed. We have taken delegations out in the field to harvest kangaroos. The demand is there. We have just to date been able to establish a protocol with the Chinese authorities.”