Cattle wait in an enclosure at a livestock export yard in Noonamah, about 50 km (31 miles) south of the northern Australian city of Darwin in this June 7, 2004 file photo. Credit: Reuters/Tim Wimborne/Files
Cattle wait in an enclosure at a livestock export yard in Noonamah, about 50 km (31 miles) south of the northern Australian city of Darwin in this June 7, 2004 file photo. Credit: Reuters/Tim Wimborne/Files

An insect the size of a pen tip is frustrating efforts by Australia to sign a deal, potentially worth billions of dollars, to export live cattle to China to feed its fast-growing appetite for red meat.

Talks have stalled over the presence in the Australian herd of Bluetongue disease, a virus which is spread by midges, a tiny fly. While the disease usually has little effect on cattle, it would pose a major threat to China's 140 million-strong sheep flock, the world's largest.

"I was hoping we could get a deal by now," Barnaby Joyce, Australia's agriculture minister, told Reuters. "We are on the edge of securing a deal but unfortunately in trade, you can be on the edge for quite some time."

Shipping live animals from Australia to China has been discussed for many years. Official talks began in February and a team of Chinese scientists is currently carrying out on-site inspections, but there is no timetable for an agreement and no guarantee one will be reached.

Live exports could help curb high beef prices in China and open up a new market for Australian farmers. China's total beef imports are expected to roughly treble to $9 billion by 2025, according to Australian government and UN estimates.

Bluetongue, which is common in tropical and subtropical regions, was first detected in Australia about 35 years ago, and has since spread across the country's north, carried by the blood-feeding midges.

Any live cattle deal is now expected to be delayed until at least 2015, according to officials at regulatory agencies and industry bodies.

Stalled Chinese output

Despite buoyant demand for meat, limited land, water and feed is keeping China's cattle herd from growing in size. Many feedlots and abattoirs are all but empty.

Chinese beef production is expected to ease slightly in 2015 to 6.5 million tonnes, according to the U.S. Department of Agriculture.

China has turned to imports to meet demand, including from Australia, the world's third-largest exporter. It takes about half of its needs from Australia, buying A$785 million worth of red meat in 2013/14, according to Australian government data

However, with rising demand for Australian meat from the United States, Australian exports to China are set to stall at 160,000 tonnes during 2014/15.

This has kept China's domestic prices high at around 63 yuan ($10.28) per kilo in retail markets, just below a record 66 yuan per kilo, say analysts.

"Beef prices will remain at high levels in the short-term," said Pan Chenjun, senior analyst at Rabobank. "China is already allowing more imports but the international market price is quite high."

Live export dream

Australia, which has a national herd of some 27 million head, is forecast to export about a million live cattle in 2014/15 worth some A$830 million, with more than half going to Indonesia.

Although the price of live cattle is at record highs, underutilized feedlots and abattoirs and cheaper labor in China should allow the Asian country to keep down costs.

China's regulatory agency, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), said a group of scientists is now in Australia, but offered no guarantee a deal with Australia would go ahead.

The delegation is looking at how Bluetongue is managed, Australia's Department of Agriculture said. Analysts said that if a deal is agreed, it was likely Australian cattle would be quarantined for several weeks to ensure no sign of Bluetongue.

For Australian producers, the stakes are high.

"If beef demand in China takes off, there probably isn't enough cattle in Australia to keep up," said Willem Rudolf Westra van Holthe, minister for primary industry in Australia's Northern Territory.