A comeback for HGP?

The provision is contained in Chapter 3 of the agreement, Article 3.1.1 Annex 4.5:

"Within one month of the date of entry into force of this Agreement, China shall adopt maximum residue limits (MRLs) for zeranol, trenbolone acetate, and melangesterol acetate for imported beef. For beef tissues for which Codex has established MRLs for these hormones, China shall adopt the Codex MRLs. For beef tissues for which Codex has not established MRLs for these hormones, China shall adopt its MRLs by following Codex standards and guidelines and referring to MRLs established by other countries that have performed science-based risk assessments."

In other words, under pressure from the US, China has agreed to drop its requirement for imported beef to be HGP-free.

True, this is an agreement between the US and China but China cannot give the US a concession on HGP usage while maintaining a ban on it with other global beef suppliers.

Such a move would compromise other countries' trading rights and violate World Trade Organisation (WTO) rules.

Interestingly, the EU has already flagged that it will challenge the China-US trade agreement at the WTO if it creates 'distortions' in the market.

Ambassador Nicolas Chapuis told reporters on Friday that the EU would monitor the implementation of the deal.

A touch ironic therefore that it was the EU who were subject to a complaint from the US in the 1990s over the very issue of HGP in meat.

That complaint dragged on through the appeals process until the US slapped WTO-compliant retaliatory tariffs on certain European products.

A compromise was reached and a memorandum of understanding struck between Brussels and Washington which resulted in the EU opening its market in 2009 to the sizeable 48,200 tonne zero-tariff quota of HGP-free grain-fed beef.

That it was intended as a deal between the EU and the US is not in doubt but of course under WTO rules it could not compromise other countries' trading rights and so 'qualified suppliers' such as Australia got a piece of the action.

All of this is relevant because the EU recently decided to give the lion's share of the now 45,000t HQGF quota exclusively to the US (progressively over a period of years) as an appeasement over yet another tariff issue.

They managed to get agreement for that because Australia (and others) acquiesced.

A big part of the reason why Australia agreed to not oppose the deal was the problematic three-monthly first-come-first-served administrative process of the EU quota and China emerging as an alternative HGP-free market which offered continuous rather than intermittent production runs and better prices for cuts which the EU did not particularly want.

Now all of a sudden the reason for Australia giving up most of its stake in the EU HQGF market has evaporated.

As China aligns itself with Codex MRLs, the only remaining HGP-free export market will be the EU, which Australia has now largely forsaken.

Admittedly the Hilton quota will likely persist but whether that (and the remaining portion of the HQGF quota that has to be shared with other countries) amounts to sufficient reason for producers to maintain EU accreditation remains to be seen.

While China remained HGP-free there was probably incentive to retain EU accreditation as the cattle could go either way.

EU cattle will still be able to go in a box to China but at the cost of improved production and better returns through HGP usage.

With the prospect now of all four major export markets (representing more than 80 per cent of total exports) being open to HGP-treated cattle, a trend back to more widespread HGP usage would seem likely at least from an economic viewpoint.

The only thing that may cause it not to happen is that Australia has become used to not using HGPs.

Australia's reduction in HGP usage probably dates back to around 2012-2013, the time the Chinese market really started to fire up.

This also happens to coincide with the onset of drought, which would have naturally affected demand for HGPs for paddock-reared cattle because of lack of grass.

In effect, the downturn in HGP usage has been going on for quite a long time so it is very likely that some degree of righteousness has developed along the way in regard to non-use of the product.

That sentiment has been encouraged at home by television advertising for 'no added hormones' in one particular supermarket brand of meat and constant reference to the importance of Australia's 'clean green' reputation in overseas markets.

All of this makes for some interesting times ahead in how the science, sentiment and economic rationalism of HGP usage play out.

WIDESPREAD rain throughout the eastern states and some particularly good falls in south-east Queensland and north-east NSW have fired up physical and online auction markets.

Buyers dived into the lightweight weaners on AuctionsPlus on Friday last week.

Angus cross weaner heifers at Talwood weighing 156kg made $600 (384c/kg). Unweaned Santa cross steers at Woodenbong weighing 181kg made $725 (400c/kg).

But the crown went to a good line of Angus weaner steers at Guyra weighing 134kg. These made $625 or a whopping 465c/kg. Similar types at Tenterfield made 427c/kg with their little sisters hot on their heels at 414c/kg. In the slaughter market, heavy cows were 37-48c dearer at Wagga on Monday taking them to a top of 260c.

Not to be outdone, Tamworth cows on Monday were 48-50c dearer at a top of 283c.

Published grid rates early this week in southern and central Qld were unchanged on previous settings of 560c for 4-tooth ox and 460c for cow. However activity in physical markets suggests an adjustment to hooks rates is not far away.