High prices block China cattle market

Trevor Chappell
AAP

Agribusiness Ruralco says quarantine issues and the high price of Australian cattle are holding back the live export trade to China.

"The obvious medium to long-term opportunity is cattle into China," Ruralco chief executive Travis Dillon said as the company reported its half year financial results.

"That's a slow burn partly because of quarantine issues that are still to be resolved, but also partly because the cost of Australian cattle is still high."

Mr Dillon said quarantine issues centre on the potentially deadly bluetongue disease found in northern Australia, and the resistance of Chinese authorities to allow Australian cattle into bluetongue-free zones in China.

"But the real issue in terms of momentum is around the cattle price," Mr Dillon said.

"Our cattle are still too expensive going into China."

South America is exporting a lot of less expensive cattle to China, and boxed frozen beef is also providing competition for live exports, he said.

Australian cattle prices may have to come down by around 20 per cent to boost live export markets, Mr Dillon said.

Ruralco's profit in the six months to March rose 15 per cent to a record $12.4 million, as favourable conditions in summer boosted cropping and weed-spraying activity, lifting sales of rural supplies such as agricultural chemicals and fertiliser.

Strong livestock prices also boosted agency sales and margins.

Mr Dillon said Ruralco's live cattle export business performed well in the first half of its fiscal year, and the company plans to pursue conservative growth in the business.

Ruralco's key markets for live exports are currently Vietnam and Indonesia.

Mr Dillon said livestock and wool prices should remain relatively strong in the second half of the company's fiscal year, but cattle prices should ease towards the end of calendar 2017, which may create more opportunities in export markets.

Ruralco said good rainfall South Australia, Victoria, Tasmania and southern NSW had provided a solid start to the winter cropping season, but more rain is needed in southern Queensland, Western Australia and northern NSW.

Shares in Ruralco were up two cents at $3.06 at 1315 AEST.

GOOD SUMMER CONDITIONS BOOST RURALCO'S PROFIT

* Half year net profit up 14.7pct to $12.4m

* Revenue up 4.4pct to $841.4m

* Interim dividend up one cent to nine cents, fully franked