Challenging year ahead for Australia’s food exporters

Australia’s food exporters are facing a challenging year, with the value of shipments set to drop by 10 per cent as the country grapples with souring Chinese ties, shrinking meat sales and a virus-driven downturn in demand.

Government forecaster Abares expects agricultural exports to shrink to A$43.5 billion ($47b) as prices for many of its exports, including meat, wheat, barley and wine, slump because of the pandemic and Chinese trade restrictions.

Lower meat output, as rains spur farmers to retain cattle rather than slaughter them, is set to reduce the volume and value of exports, while rising grain production will offset the negative impact on shipments of lower prices.

Barley exports have been hit by China’s decision to slap tariffs of more than 80 per cent on the country’s shipments — then bar imports from biggest shipper CBH Grain, according to Abares’ September report.

“The Australian feed barley price is expected to fall to A$230 per tonne, 17 per cent below the world indicator price.”

China’s imports of Australian barley have slumped as relations have worsened.

Still, other markets are opening up as prices decline. The biggest new market for barley has been Thailand, said IKON Commodities chief executive Ole Houe.

Abares points to Asian and Middle Eastern markets including Japan and Saudi Arabia as potential buyers.

The agency forecasts barley exports rising 31 per cent in value in 2020-21 from a year earlier, with volume gaining 65 per cent and prices dropping 21 per cent.

Production is forecast to jump 25 per cent because of good rains.

Wheat growers are also scrutinising China, as its customs agency this month put Australian exporters on notice that it will be stepping up inspections of shipments. It’s bad timing for farmers, with a 91 per cent year-onyear increase in output expected from the coming harvest, following several years of drought.

Still, while China has been an increasingly big buyer of Australian wheat, it doesn’t dominate purchases. A free trade agreement with Indonesia that cuts feed grain tariffs is expected to bolster buying of wheat and barley.

The value of wheat exports is seen rising 27 per cent in 2020-21.

Meat production and exports are being curbed in Australia as producers hold back livestock to rebuild herds after years of drought.

Several meatworks have been banned from shipping to China, after alleged packaging and contamination violations, while Abares also cites Covid-19 sample testing at Chinese ports as “an additional downside risk” if the virus becomes widespread in Australia.

Still, other buyers are waiting to pick up any slack. “At the moment beef is finding a home in major export markets, with low supply helping to prop up prices,” said Mecardo analyst Angus Brown.

The value of Australian wine exports is forecast to decline as volumes and prices fall.

Demand for wine has taken a hit from Covid-related restaurant and hotel closings during shutdowns, though at-home consumption increased. Like other types of agriculture, the wine industry has been hurt by drought, with the 2020 grape crush the smallest in a decade, according to marketing body Wine Australia.

Another blow to the wine industry came last month when China announced twin anti-dumping and anti-subsidy investigations.

The value of Australian wine exports is forecast to decline as volumes and prices fall.