14 August 2015
A trip to China last month served up more than hot pot for Neville McDonald. The West Australian producer came away with insights into consumer trends and market prospects for Australian lamb.
Neville runs a 70% cropping, 30% sheep enterprise on 12,000ha at Beaumont, east of Esperance WA, with his parents and brothers. They run 4,000 ewes and operate a lamb feedlot which turns out 25,000 head a year, mainly direct to Bunbury processor V&V Walsh.
In August 2014, V&V Walsh signed a joint venture agreement with Grand Farm, the largest sheepmeat and third largest beef importer into China. This will see V&V Walsh supply frozen WA lamb and beef to Grand Farm’s new processing facilities in Xilinhot, Inner Mongolia, once it is granted export accreditation to China later in 2015.
MLA and the Department of Agriculture and Food, WA (DAFWA) support the development of this new value chain as part of a program to increase WA lamb production and improve supply chain efficiencies and returns to producers.
The China tour in July not only gave Neville, seven other sheep producers and industry representatives an insight into the supply chain and market requirements, but saw an MOU signed by MLA, V&V Walsh, Grand Farm Group and DAFWA to supply an additional 500,000 lambs per year into Grand Farms’ Chinese distribution channels.
Neville’s five ‘lessons learned’ from the China Insight Tour were:
Different markets demand different products: Neville was surprised to see sheep kidneys priced higher than loin chops in Chinese supermarkets. Other secondary cuts, such as necks, flaps and briskets are also popular with Chinese consumers, creating an opportunity to value-add Australian lamb. Australia’s clean, green status is invaluable: Meat managers in Grand Farm retail outlets reinforced the importance of Australia’s environmental and food safety credentials. Neville said the message to the Australian sheepmeat industry was to embrace quality assurance and traceability systems to maintain product integrity across the supply chain. There are gaps in integrity: The lack of market access for chilled Australian sheepmeat undermines the true value of our products. Frozen product is defrosted and processed in China, and although some companies such as Grand Farms do identify Australian product, not all companies do. Neville sees this as a breach in product integrity, and would like to see more chilled lamb sent to China. Supply chain relationships are important: Neville said good relationships with his stock agent and processor are integral to his business. He said two-way feedback is important to position processors and producers to take advantage of new marketing opportunities. Demand is huge: There are between 360-520 million Chinese middle class consumers who want safe and healthy protein. Although Neville came home with the ‘gut feel’ that China’s hunger for Australian lamb won’t slow, he will take cautious approach in his own business with a slow increase in ewe numbers and a feedlot expansion on the cards. He said supplying lamb to China in spring, when there is a gap in their domestic production, could present a price benefit for Australian producers.MLA will use the V&V Walsh and Grand Farm supply chain model to develop other projects which aim to sustainably increase lamb production, improve supply chain efficiencies and returns to producers. It is part of MLA’s involvement, through the MLA Donor Company (which doesn’t use producer levies), to co-invest in a number of targeted, strategically-aligned programs within the $300 million DAFWA Royalties for Regions program to secure the profitability and sustainability of WA’s food and agriculture sector.
