19 May 2017

2017 NAB Agribusiness China Tour

NAB’s China study tour will take place 13 – 23 May 2017, with 25 customers and NAB staff.

It includes visits to Alibaba Group, the world’s second-largest e-commerce player; Shandong RuYi, the textile manufacturer that purchased Cubbie Station in 2013; COFCO, China’s largest food processor, manufacturer and commodity trader; and the Agricultural Development Bank of China.

The tour will include regional China, where tour members will explore wool processing plants, live cattle processing facilities, meat processing companies, sheep and cattle farms, feedlots, yarn-making factories and hypermarkets.

 

Sunday, 14 May – Shanghai Jianqia Meat Markets
‘There is a strong Chinese love of Australian beef and red meat products’
On day two we visited Shanghai Jianqia Meat Markets which was an amazing site. There are some 1,800 stalls on this massive site with a lot of hype, noise and excitement. There was much excitement when we spotted Australian meat content on a number of occasions. The Australian content of the markets was predominately seafood and red meat. One of the larger vendors showed us the Australian and Brazil content in their shop.

There is a strong Chinese love of Australian beef and red meat products. Australian produce is seen as a clean safe food product which bodes well for their marketing and subsequent sales that are generated. Another important factor for the Chinese is the traceability aspect, due to a number of food related contamination issues over the last 5-7 years, which means the local produce is not viewed as safe as Australian content.

They showed the tour group some cherries that were imported from NSW. The cherries had been sent from the farm 48 hours earlier, now sitting in front of us in a fresh fruit stall in Shanghai. This is a great example of globalisation and operating in a global market and how well some of our supply chains are operating in this space.

Among other insights were that the margins on product are tight and inventory needs to be managed carefully. The other main issue is spoilage and dealing with perishable items; they manage inventory levels very carefully as spoilage can cause major financial losses, not dissimilar to our markets based in Australia.

Sunday, 14 May – Tianyu Wool
‘They are genuinely concerned about the ageing population in the wool industry in Australia, and this could provide future supply issues.’

Tianyu is an established business with 20 years of history in China and Australia and was recently featured in the ABC Landline, “Window on China” program. Located in the Free Trade Zone, Tianyu Wool is a prominent importer, manufacturer and exporter which engages in scouring wool, wool top manufacturing and functional processing. The annual output of scoured wool is 80,000 tons. 10% of Australian wool exported is bought by Tianyu Wool.

Tianyu has been one of the major highlight thus far, which drew many questions from a panel of NAB customers across different market segments. Much to our surprise was the level of sophistication in the business, truly matching the product they are processing to the end user and the difficulty that exists in purchases inventory to match these requirements. They are genuinely concerned about the ageing population in the wool industry in Australia, and this could provide future supply issues. The hosts noted the reduction in fine wool producers and the push to crossbred types with coarse wool types.

This trend has risen dramatically and could provide further pressure on the wool market which could ultimately drive up prices in the short to medium term for finer wool types i.e. sub 19.5 microns.

Sunday, 14 May – Carrefour
‘The story behind where the food is produced and manufactured is as important as the food itself. They really want an ecofriendly reduced process…’

Carrefour is a French-owned high-end supermarket. Here you can gain an overall appreciation of the supermarket’s imported food offering which will provide an insight into the typical “middle-class Chinese” and their shopping behaviour.

The discussion between Carrefour was really around how they develop a product line/brand of each product. This high end supermarket really is tailoring their business by telling a story. The story behind where the food is produced and manufactured is as important as the food itself. They really want an ecofriendly reduced process and zero chemical use for any products/product lines.
Carrefour works closely with their suppliers to develop the appropriate export channels and to ensure they have access to the right product that they wish to market on their shelves and via their online eChannels.

NAB customers took the opportunity to reach out to the presenter as the customer would like to also work with Carrefour to see if they could commence an export program with some Australian content.

Immediately after the official presentation in the board room, they took us to the main super market floor to have a look at some of their strategies and product lines, and discuss how their export channels were developed. He also discussed the variable nature of the consumer and the need to remain agile yet relevant in the current environment.

‘The Carrefore Mantra’:
1.    Real partnership with Agricultural producers – food safety is extremely high
2.    Tasty products e.g. Pineapple from Tainan
3.    Origin is very important at the most famous place of the original source
4.    Sustainable development
5.    Quality/Price ratio

Wednesday, 17 May – Kerchin Cattle Nanyang
NAB Customer Chris Clemson, a livestock agent from NSW, shares his insights on Day 5 of the tour…

“There is unlimited demand for beef in China to come out of Australia and they’re keen to get involved. Whether that is joint ownership in abattoirs or live export, their numbers of cattle are very low in comparison to the 1.4 billion people they need to feed. There’s a great opportunity there for Australian beef producers in the future.

“The other thing I have learned is scale is king, as it is in Australia. The bigger the operation, the cheaper and more efficiently you can do it.

“Also with cattle in China, genetically they need a lot of advancement. I think there is an opportunity for Australians to introduce genetics, with some of our cattle like Angus.”

 

Wednesday, 17 May – Shuanghui Group (WH Group)

One of the key trends learned was the emerging opportunity for pork export to China. This is a vacuum area for Australian exporters…

Established more than 30 years ago, Shuanghui Group (also known as WH Group) was a privately owned Chinese meat processing company headquartered in Luohe, Henan, China. Its main business includes hog raising, consumer meat products, flavouring products, and logistics. It achieved public listing status after the acquisition of “Smithfield Foods” from the USA. WH Group is the largest pork producer in the world, and the largest meat producer in China. The journey of “Smithfield” to develop hormone-free products was key to its export to China.  It currently exports 50% of US pork products to China.

The visit commenced with a tour of the processing plant and boning operations. NAB Customers were amazed with the scale of the operation, and whilst they were amazed around the sophistication of the production line (better than they expected).

One of the key trends learned was the emerging opportunity for pork export to China. This is a vacuum area for Australian exporters, though ChAFTA has opened the door in theory but no trade happens. Pork is becoming one of China’s greatest import products from around the world.

The same message should be learned by Aussie beef producers and exporters; we need to develop profitable yet hormone-free products for beef, same for pork. On the tour, the first question asked by WH Group during our tour was that whether pork producers in Australia uses Paylean. The pork products we produce here tend to be lean by using Paylean, pork products in China are instead fatter as preferred by its consumers. The pork industry needs to find a way to make the trade real as it should deliver by ChAFTA.

 

Friday, 19 May – Shandong Ruixing Group:

This is the first time they will hit the Australia market; this could be a serious mover and shaker in the Australian fertiliser industry.

As the leading fertiliser manufacturer in Shandong, Ruixing Group both imports and exports its core products to Korea, Indonesia, the Philippines, Australia and other countries. It also runs a large food processing plant for corn. Ruixing set up its Australian office in Sydney two years ago and recently received accreditation in Australia for fertiliser imports.

They have online channels via Alibaba group which will assist in this process. In their online sales platform, they truly believe this will be more of the new way to do business. This is in contrast to the bulk shipments and import agencies such as Pivot/Elders/Landmark which are Australia’s traditional fertilizer channels at the moment.

  • This is the first time they will hit the Australia market; this could be a serious mover and shaker in the Australian fertiliser industry. Australia has been dominated by two main suppliers
  • Shandong Ruixing chemical industrial group co .is one of large sized enterprises integrating industry, scientific technology and trade, with a licensed import & export department.

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