COLES managing director John Durkan said Australians should not have to pay at the checkout if farmgate prices rise after free trade agreement (FTA) with China.
Federal Agriculture Minister Barnaby Joyce conceded on Tuesday that farmers would be able to demand higher prices as there would be more buyers following the reduction of tariffs on a range of produce sold to China.
This has raised concerns food prices would rise as retailers passed on higher costs of buying produce.
But Mr Durkan said agricultural production would increase over the long term to meet fresh demands from China, which would limit price rises for consumers.
In the short term he said it may be more difficult but he vowed Coles customers would not get slugged for produce price rises resulting from the FTA.
"I don't expect Australians to have to pay for a free trade agreement," Mr Durkan said.
"We certainly won't be lifting prices. Over the long term there will be more supply in Australia."
Mr Durkan was in Perth on Wednesday for a Coles-backed Global Food Foundation food summit, where one of China's largest food processors and agricultural traders, COFCO, signalled its intent to strike a Memorandum of Understanding.
The deal provides for "mutual co-operation" between the non-profit foundation and COFCO to contribute to global food security.
COFCO Australia deputy general manager Honghuan Pan, who has been based in Perth for four years, said the Chinese group COFCO, which stands for China National Cereals, Oils and Foodstuffs Corporation, is state-owned.
Farms not COFCO's expertise
Ms Pan said COFCO, which owns Queensland sugar mill Tully Sugar, was not interested in buying farms because its expertise was in processing and trading.
"We don't have the experience to be farming," Ms Pan said.
"We would like maybe to co-operate with farmers not only in the domestic market but also in Australia and other markets."
Ms Pan said COFCO was looking at the potential to expand its processing assets in China to cater to the potential for Australian live cattle to be exported to China.
The Abbott government is working with China to strike a deal that could see more than a million head of cattle exported to China each year, a figure that would require the nation to boost its herd. Cattle could then be processed more cheaply in China.
"We all know that the beef and lamb industries are very labour-intensive. To save the cost of this industry we think (exporting) live cattle is very good for .?.?. Australia," said Ms Pan.
Ms Pan said if the deal proceeded COFCO may look to develop processing assets closer to the nation's ports, rather than rely on assets further inland.
Mining billionaires Andrew Forrest and Gina Rinehart have begun investing in agriculture in the past year and stand to benefit from the opening up of trade to China.
Mr Forrest, who bought Western Australia's largest beef processor Harvey Beef, said it made sense to export live cattle to China rather than process it all in Australia because there was excess processing capacity in China.
"If this new policy is executed I believe the Chinese companies will be able to set up new facilities along the coast areas rather than inland," Ms Pan said.
"We have to be sure this policy will be executed so we have to wait and see what will happen."