Australia locks in more beef exports to Russia

Some deft manoeuvring by Australian negotiators in Europe and Russia has substantially broadened export opportunities for the beef industry during 2010 and beyond.

In the European Union (EU) market, Australia now has access to a brand-new 20,000 tonne multi-country quota for high-quality grain-fed beef — reportedly the first new quota category to come out of Europe in about three decades.

In Russia, an important emerging market, Australia seemed likely to be locked into a miserly 10,000t quota until its position was recently re-negotiated into another shared quota allocation of about 448,000 tonnes.

The new EU quota is hedged about with strict criteria: beef must be 100-days grain fed to AUSMEAT standards, and must meet additional age, diet and days on feed requirements over and above existing accreditation schemes here and in Europe.

Australia must also share the quota with, among others, grain-feeding heavyweight the United States, which inspired the quota in the first place.

MLA’s Europe regional manager, David Jones, explained that the new quota deal was a compromise deal to settle a long trade standoff between the EU and US over the EU’s refusal to take beef treated with growth hormones.

The EU has maintained its stance on hormones, but forestalled US threats to impose trade sanctions by opening up the new quota category.

The quota allows for an extra 20,000 tonnes a year of high-quality, hormone-free beef for three years, opening up to 45,000 tonnes in the fourth year.

Australian Lot Feeders Association (ALFA) president Jim Cudmore said the new route into the EU is "just the tonic our sector requires in these difficult times".

"The recent high Australian dollar has put pressure on our beef exports, and any improvement in market access is a win for Australian farmers at a critical time."

The strictness of the requirements will limit the number of local lotfeeders and exporters willing to take up the quota, Mr Cudmore said, but the same culling process will be at work in competitor countries.

Australia already has in place the systems and reputation that provide it with favoured access to demanding markets like the EU.

David Jones reported that in Russia, unofficial documents being circulated late in 2009 suggested that Australia might be locked into a limited 10,000 tariff rate quota, with the lion’s share of annual Russian beef imports being allocated to "Other Countries" — largely the South American beef exporting nations.

Australia exported about 13,000 tonnes of beef to Russia in 2009. That was a swift contraction, on the back of the global financial meltdown, from the export bull run of 2008 when Australia’s red meat exports to the Commonwealth of Independent States (CIS) hit a high of 72,035 tonnes — almost all of it to Russia.

Pre-GFC, the United States Department of Agriculture (USDA) forecast that Russian demand for red meat would balloon 350,000 tonnes between 2007-2017 on the strength of petrodollar wealth.

That enormous potential means that Russia is a market too important to be sidelined. Mr Jones said some hasty negotiations on the strength of the documents recently emerged with a qualified triumph: Australia is now part of the "Other Countries" quota covering imports of 448,000 tonnes of frozen beef.

The qualifier is that it must compete for that tonnage with the likes of Brazil, Argentina and Paraguay for the custom of a country where, unlike the EU, price can take precedence over quality assurance.

However, MLA managing director David Palmer commented that Russia "has shown us some spectacular capability".

"We didn’t want to be harnessed by a 10,000t quota. Being able to negotiate to be part of 448,000 tonnes of quota is an absolutely fabulous outcome."

"Brazil’s performance to date is something less than half that amount, so there is a really good reservoir of quota there that more truly reflects the potential of what I think is an exciting meat economy."

The EU and Russian quotas are held by importers, who will negotiate with their suppliers of choice.

"It’s all up to the commercial side now," David Jones said.