China's beef cattle herd and sheep flock are falling, and China's consumer demand is rising due to increasing incomes and changing diets.

This should lead to an increasing gap which imports can fill.

Australia will need to compete with other suppliers to meet this potential demand.

The challenge to this growth potential for Australian beef and lamb is from the rising Australian dollar against the US dollar and, in the longer term, the domestic production of pork and chicken meat.

For Australian lamb exports to China, an added challenge is the high prices for lamb due to a squeeze on supply around the world, which may put lamb out of the reach of many Chinese consumers.

Even so, volumes will be relatively small and any lift will not be enough to offset the current decline in demand for Australian beef from the larger export markets.

While China produces enough beef to supply its domestic market, it imports a small quantity of beef (around 80,000 tonnes, compared with consumption of 5.5 million tonnes), although this has increased in the past 10 years.

Australia supplies around 3000t, although MLA expects this to lift to 5500t in 2009.