Gina Rinehart has grand plans to expand her business in the export of live cattle to China’s burgeoning middle class.
According to a report in the Financial Times, right now there’s one major roadblock; the culicoides midge — a tiny insect which transmits the bluetongue virus among livestock.
It’s particularly prevalent in northern Australia, where Ms Rinehart now owns a number of cattle stations.
Rinehart’s ambitions form part of the broader national strategy to foster Australia’s standing and capabilities as an exporter of quality agricultural products to Asia.
“Many people are aware of the changing demographics in China,” Mrs Rinehart told the Financial Times.
“A rapidly expanding middle class have increasing disposable incomes as China’s economic growth continues. These are people wanting more prime cuts and fresh beef.”
A bilateral trade agreement was struck with China in 2014, which included a broad framework for live cattle exports.
However, for the northern Australian regions susceptible to the bluetongue virus, China enforces a strict procedure in which cattle must be kept in quarantine on Australian shores for a period of 60 days.
According to the Financial Times, that makes trading live cattle from Northern Australia — which contains 60% of Australia’s total cattle numbers — unprofitable.
The restrictions placed on the live cattle trade are representative of the risks and difficulties of trading in agricultural and food products in China.
One only has to look at the recent challenges faced by Bellamy’s, the Australian manufacturer of infant baby formula. The company has gone into two trading halts while seemingly at the mercy of new licensing requirements issued by Chinese regulators.
Attempts have been made to ship cattle from southern Australian regions where there’s no risk from the bluetongue virus, but the longer shipping distances make it difficult and only 1,200 cattle were shipped to China last year.
In an effort to appease Chinese authorities, Rinehart has partnered with four Chinese companies and formed a joint venture on Jintang Island near Shanghai.
According to the Financial Times, Jintang will form a key agricultural trading hub between Australia and China.
The island has beef-processing facilities where the required testing can be carried out to meet the standards of Chinese regulators.
Garry Korte, the chief executive of Rinehart’s company Hancock Prospecting, told the Financial Times that “we are still working through several regulatory matters”.
“The key to the development of the live cattle trade is gaining long-term secure access to a major new market … a market of 200 million people within a radius of 200km living in the Yangtze Delta region,” Korte said.
Cutting edge processing facilities have been set up in Northern Australia, which use facial-recognition technology to track cattle on their journeys to current live-trade destinations such as Vietnam and Indonesia.
Plans have been discussed to set up similar high-tech processing facilities on Jintang Island in an effort to further build trust with Chinese authorities.
For Rinehart, the first major hurdle is for China to relax its overly-burdensome 60-day domestic quarantine requirements.
Hancock Prospecting and its joint venture partners in China are hopeful for a change in regulations by the end of the year.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.