THE Australian beef industry should not be disillusioned by slow progress in penetrating the promising new tariff-free EU grainfed beef market, but instead see the trade as work in progress with longer-term benefits.
That's the view of Meat and Livestock Australia's recently appointed Europe manager Jason Strong, who was back in Australia briefly last week.
He said some of the expectations that had built-up when the new trade opened in February were perhaps a little over-optimistic.
Since Australia joined the US in February as the only other eligible supplier to the EU grainfed trade, only about 743 tonnes of Australian beef had entered the market - about 5 per cent of the available 14,000t quota access since February.
Significantly, however, the US had also fallen well short of filling the EU grainfed opportunity this year, leaving most of the quota access unexploited.
Sourcing adequate numbers of EU-accredited feeder cattle has been the big stumbling block on both sides of the Pacific.
Mr Strong said the overarching message was that Australia would continue to face challenges in supplying the new EU grainfed trade if it did not become proactive 'virtually straight away,' in building supply capability.
In order for that to happen, a lot more beef producers would need to gain EU accreditation, to drive the supply of eligible feeder cattle.
After a slow start, volumes out of Australia were now increasing, and Mr Strong hoped that the first full quota year (July 2010 to June 2011) would deliver somewhere between 5000 and 7000 tonnes.
"If it is only 4000t in year one, I think we would be disappointed, while anything above 7000t would be a very good start," he said.
"But in order for that to happen, livestock supply will be the key. Currently there are only about 300 active EU-accredited cattle suppliers in Queensland, out of a total producer population in the tens of thousands."
Beyond simple volume of supply however, the most important challenge for Australia was in meeting EU customer expectations over consistency and quality.
Part of that was about better educating customers about the range of beef Australia could produce, and how to order it.
Mr Strong conceded that there had been some misunderstandings in the new trade in its very early stages. Some importers had assumed that all Australian supply would be equivalent to USDA Choice grade, or the better end of marbling score 2.
While Australia was certainly able to supply that, if the importer specified it, there was some lack of appreciation about the different types of product that could be shipped under the EU grainfed protocol.
"That is essentially an education issue, not an issue over non-performance or non-compliance, and importers are now recognising that," Mr Strong said.
Equally, there were EU importers that were happy to take a less heavily marbled product, priced accordingly.
Mr Strong suggested the main early opportunities in the grainfed EU trade would continue to be in the upper-end of food service and catering segments. Working on ways to maximise some of the non traditional loin cuts for use in further processing would also be useful.
Some importers working with large retail operators were also looking at opportunities using a limited number of cuts promoted as Australian product.
Part of the challenge in this was in Australia's history as a grassfed EU supplier, meaning there was an underlying perception in some circles that Australian beef generally might be lower quality than US supply.
"Relationships between sup-pliers and customers will also be the key for us, going forward," Mr Strong said.
"This is not going to be an outlet for commodity-type trade in beef, but one where high-quality customers are prepared to pay really good money for the right item, and that will depend on relationships with their suppliers."
Australia was already seen very favourably in Europe for its food safety, traceability and animal health status.
There was a noticeable shift in attitude occurring within the EU over imported beef supply, because of the region's large and growing protein deficit, Mr Strong said.
Currently, the grainfed quota can only be supplied by Australia and the US grainfed industries, however other potential suppliers are also eyeing-off the opportunity.
Uruguay is one example, which could seek access under the terms of the agreement within the next 12 months.
As a result, Australia needed to move swiftly in order to cement its position as a large and committed supplier to the trade.
In order for this to happen, effectively twice as many cattle would be required as under the pre-existing Hilton grassfed quota, Mr Strong suggested.
Responding recently to questions about the level of premium required to induce more producers to adopt EU accreditation, Teys corporate affairs general manager Tom Maguire said there would be some times when EU premiums were more attractive than others. But market access was the key, in order to maximise returns.
"Producers who want to maximise the amount of money they make from cattle at least need to qualify for EU supply.
In the same way, processors do not necessarily send meat to any one particular high-value market all the time, but do so when they represent the best price option. In order to have the flexibility to advantage of that, market accessibility is critical."
The new EU grainfed quota differs greatly from others Australian that exporters have worked under previously.
Firstly, it is importer, rather than exporter driven.
Importers applied for a share of the quota each month, and the 20,000t annual entitlement is split into 12 equal monthly allocations, each of about 1660t.
One of the biggest attractions is that the EU grainfed trade does not attract the 20pc import tariff that applies to Australia's 7000t grassfed EU quota.
