China deal to boost grain boom

10 Sep, 2015 05:05 AM
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The value of sorghum sold to China was $US297 million.
China was prepared to pay far more than traditional buyers in the Middle East.
The value of sorghum sold to China was $US297 million.

CHINA bought almost every shipment of Australian sorghum and barley for the first time ever this year, highlighting the importance of agriculture to a trade deal between the two countries that has been agreed but not ratified.

As the selling season comes to an end government figures show Australian exports of barley, sorghum and wheat to China will top $US1.5 billion ($2.14 billion) this year, nearly double the value of sales to Indonesia.

"It's a very big change," said Michael Cole-Sinclair the trading manager at Emerald Grain in Melbourne.

"The Chinese bought almost 100 per cent of the barley and sorghum we exported, as they were prepared to pay far more than traditional buyers in the Middle East."

Farm groups say this trade should improve further under the proposed Free Trade Agreement with China, which the federal opposition is campaigning against.

In Parliament on Wednesday Prime Minister Tony Abbott ramped up his accusations of racism against Labor, asking why the opposition had supported similar deals with Japan, South Korea and Chile. Mr Abbott said these deals had labour market provisions just as the China-Australia agreement does.

With both sides reduced to screaming at each other in Parliament over the deal, Mr Abbott accused Labor of "channelling the hate speech of the CFMEU" and of being xenophobic and racist.

Labor insists the wording and the accompanying documentation shows the government kowtowed to Chinese pressure, and it will allow Beijing to bring in its own workers.

Farm groups insist the deal is crucial for their international competiveness, as it will see the 2 per cent tariff on sorghum and 3 per cent tariff on barley gradually eliminated.

"Most farmers have large operations which run on very tight margins so the FTA will make a big difference," said David McKeon the general manager of policy at Grain Growers, the industry's peak body.

"If we delay then we miss out on these gains for another year."

A report by China's Customs Bureau showed the value of Australian barley exports to China rose 45 per cent in the first six months of the year, compared with same period in 2014.

The trade was valued at 5.4 billion yuan ($1.2 billion), making barley Australia's third-largest export to China over that period behind coal and iron ore.

The value of sorghum sold to China was $US297 million, while the wheat trade was worth $US221 million.

Australian barley has traditionally been used to make beer in China, while sorghum is the base ingredient for baijiu, the high-alcohol white spirit popular in the country's north.

The surge in Chinese buying for these two grains over recent years has been less about beverages and more about feed grains for pigs and chickens.

Unions and the opposition have no problem with the agricultural side the China-Australia FTA, but are concerned about the importation of Chinese workers. The opposition has pointed to clauses which explicitly exempt China from having to try and source Australian workers first before employing their own labour on projects worth more than $150 million.

The opposition is also concerned about what it considers loose language regarding the importation of tradespeople such as electricians, and the inclusion of an investor-state dispute settlement mechanism.

In Parliament on Wednesday, Opposition leader Bill Shorten challenged Mr Abbott about the statement on Monday by departmental official David Wilden to the committee inquiring into the FTA.

He acknowledged that Chinese tradespeople such as engineers, nurses and category three trades were currently subject to labour market testing but would be exempt under the FTA.

Mr Shorten accused Mr Abbott of selling out "Aussie jobs".

Mr Abbott continued to insist no Australian job would be filled by a foreigner unless it had been offered locally first.

He said there were similar provisions to the Chilean FTA which Labor negotiated when in government.

The Chile deal signed by the Rudd government under trade minister Simon Crean grants labour market testing exemptions for "contractual service suppliers".

The language in the China FTA is more explicit in terms of spelling out the trades and professions which would be exempt.

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READER COMMENTS

Percy
11/09/2015 1:03:50 PM

Look out for this market lest it go the same way as wool. With all eggs in the one basket then China will keep screwing the price down. So where do we go should China decide they do not want any next year?
Jock Munro
13/09/2015 4:32:03 AM

Percy, Our wheat market is now similar to the wool industry in that it is firmly in the hands of the merchants.

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