Farm exports hit by $3.5bn in China stoush

Australia’s agricultural exports have taken a $3.5bn hit this year amid escalating trade tensions with Beijing and global border closures.

Agriculture Minister David Littleproud at the Australian Bureau of Agricultural and Resource Economics and Sciences outlook in Canberra in 2018. Picture: AAP

Australia’s agricultural exports have taken a $3.5bn hit this year amid escalating trade tensions with Beijing and the COVID-19 global border closures.

While the nation’s farmgate production is forecast to rise by 7 per cent to $65bn in 2020-21 after ­the nation’s second-largest winter crop and a promising rainfall outlook, the value of exports will drop overall by 7.2 per cent.

The Australian Bureau of Agricultural and Resource Eco­no­mics has flagged a number of risks for the sector next year, including wine trade with China and labour shortages in the horticulture industry due to a smaller-than-usual foreign workforce because of travel restrictions.

The ABARES commodities report for the December quarter says that while barley and wine have been the two exports most affected by trade tensions with China, the introduction of anti-dumping tariffs is expected to heap further pressure on the wine industry.

“Disruptions to Australia’s trade with China continue, despit­e the economic benefits trade brings to both countries,” the report says.

“To date exports of barley and wine have been most affected. Australian barley has been diver­t­ed to other markets, and exports of high-value wines to China spiked in anticipation of the anti-dumping security deposits introduced in late November 2020.”

The value of Australia’s agricultural exports will drop from $48.2bn in 2019-20 to $44.7bn in 2020-21.

The report warns that while Australia may be able to divert a limited amount of wine to existing markets, such as Britain and the US, a lack of access to China will likely reduce production value and sales in 2020-21.

Australia had been China's largest supplier of imported wine, however, exports fell in the first half of this year, with volume falling by 23 per cent and value by 16 per cent compared with the same period last year.

The ABARES report says the further easing of travel restrict­ions in Australia could boost wine tourism and help counteract Chin­a’s anti-dumping sanctions.

“These activities were curtailed by COVID-19 restrictions and their revival will provide a welcome financial boost to these businesses,” it says, pointing to the fact that wine exports to Britain and the US are expected to remain high for the rest of 2020–21.

ABARES executive director Steve Hatfield-Dodds said that despite the tensions with China, agricultural production was bouncing back from the drought.

“Australian producers manage one of the most variable envir­onments in the world, so ebbs and flows in production are to be expected,” he said. “Exports have continued to find markets during the pandemic but the residual effect of past dry seasons and trade uncertainties are pushing down export value.”

Fruit and vegetable prices are expected to rise, due to the impact of COVID-19 on the availability of labour for harvesting, with the price of summer veget­ables, stone fruit and table grapes expected to rise by 15- 25 per cent.

ABARES says agricultural trade has been far less disrupted by efforts to contain the spread of COVID-19 than other goods.

“This is consistent with experienc­e during the global financia­l crisis, because food demand is relatively unresponsive to changes in income,” it said.

ABARES predicts that dom­es­tic demand for agricultural products will remain relatively strong, despite the anticipated contraction in economic activity in 2020–21. “This is because food is an essential good and because the pandemic has been well managed,” it says.

“Increased people movement will help sustain a recovery in the domestic travel, accommodation and food services sectors, which will support demand for higher unit value agricultural products.”

It says fewer cases of corona­virus was letting business precincts reopen, which will increase demand for dining at restaurants.