Australia should consider further diversifying its export markets in what has been a good season for Australian ag exports, a new report says.
Near-record setting harvests mean Australia is in a great position to explore new export opportunities, and a new report from ANZ bank says greater diversification may be a key move.
ANZ’s latest Agri Commodity report says ongoing geopolitical tensions with Australia’s biggest trade partner, China, make it a crucial time for agriculture across the country.
ANZ Head of Agribusiness, Mark Bennett, warns of the potential consequences of leveraging too much on one trading partner, urging industry to work toward building new opportunities while not diluting existing ones.
“While Australia should continue to prioritise our valuable relationship with China, which currently takes just over one third of our agri exports, being dependent on one market can leave industries vulnerable to factors that our outside of their control,” Bennett says.
“Agri sectors that produce perishable goods with a high reliance on one market – such as components of horticulture and aquaculture, including lobster – have the greatest impetus to look at diversifying their trade partners.
“Commodities where Australia is the only large exporter, such as wool, have less urgency but they should still be looking to build new opportunities.”
Australia’s agricultural exports rose significantly last year as more land was planted, coupled with favourable conditions and a prolonged harvesting period, helped the country to its second best harvest on record.
In all, 55.2 million tonnes of crops alone were recorded over the 2020-21 winter harvest; an 89 per cent upsurge from the previous year.
But finding new trade partners isn’t exactly straightforward and begs the question, who could the alternative trade partners be and what market is there for Australia’s agricultural exports?
Recently-appointed Trade Minister Dan Tehan has already earmarked India, the United Kingdom and European Union as potential partners for enhanced trade agreements.
Already, tariffs placed by China on barley exported from Australia, saw global demand for the grain come from elsewhere where new partners were found in Mexico, Saudi Arabia and Thailand.
China accounted for 62 per cent of Australian barley exports in 2019 yet that sizeable rift in the market was filled by the aforementioned countries above, protecting farms from the impacts of the tariffs.
Speaking at the ABARES Outlook 2021 conference held last week, Tehan said Australia was working internationally to ensure that globalisation was working as efficiently as possible for all nations.
“Deglobalisation is a threat and more trade, more investment and more more global cooperation is the answer,” he says.
“We remain open to working at all levels to resolve our concerns and, where we cannot resolve them bilaterally, we have taken World Trade Organisation dispute settlement action to protect our interests, such as our challenges to Canada’s wine measures, India’s sugar subsidies and most recently, the WTO dispute settlement consultations we requested in relation to China and barley.”
Repercussions for wool
However not every agricultural market is set to remain unscathed from potential economic decisions from Beijing if tensions between Australia and China don’t subside, with many suggesting the wool industry may be one of the hardest hit.
China receives 64 per cent of all wool exported globally, including over 70 per cent of all Australian exports of the product – and no other country has the capacity to replace it should that situation change.
But even then, trade between the two remains unscathed as it stands with the Chinese government even increasing its import wool quota from Australia by five per cent this year.
The continual uncertainty stemming from Australia’s reliance of trading with China has established an uneasy temperament across the agricultural industry Down Under, but Bennett says the signs are good for demand from other countries.
Lamb, for example, could see increased demand from the UK and EU given they already take a sizeable portion from this corner of the world as one of New Zealand’s top lamb partners.
Bennett adds that even though China takes 39 per cent of all Australia’s wine exports, the placement of tariffs of up to 200 per cent will not have that great an effect as China only constitutes two per cent of the global wine trade, despite its large investment in the product.
Plus, Australia already has established connections with two of the world’s biggest importers of wine, the United States and the UK, to ship the product there.
“Australia’s agri exports are well placed to explore new market opportunities as our products will continue to be sought by importers globally, thanks to our reputation for high quality goods, leading food safety attributes, and low risk trading relationships,” Bennett says.
So while possible trade obstructions with China may arise, Australia has the ability to adapt, and even more so, it looms as the perfect time to capitalise following the our hefty harvest over the past year.
By using the large harvest, as well as Australia’s reputation for producing high quality products, to springboard any new trade partners to the fray, Australia will be well placed should our association with China crumble, he says.