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"We are not at the crest of the wave, but there are going to be rough seas ahead"

There may be some rocky roads ahead for Australian exports but record values can still continue to climb

While Australia's export value has reached record highs, particularly thanks to the low currency rate and improved relations and market access, the industry should not become complacent, according to a leading Australian fresh produce analyst.

Wayne Prowse, Principal and Senior Analyst at Fresh Intelligence Consulting told Hort Connections that Australia has not reached the peak of its export potential, but he is predicting there will continue to be challenges from time to time that the industry should be prepared for.

"What we need is another big wave to come and lift us," he said. "A cheaper exchange rate, we may be hoping that doesn't happen in one sense, but that could influence exports. We want strong markets that we are exporting to, we want good access. We need to control our production to meet demand. All our ducks have to line up and we can really lift in a significant way. So, are we at the crest? No. We are not at the crest of the wave, but there are going to be rough seas ahead."

He explained that Australia exports around 21% of fruit production compared to New Zealand's 69%, with Chile, Peru and South Africa all very export-focused, and referred to previous Rabobank fruit trends to highlight some of the big export trade routes in the world.

"The main trade lanes are from Central America with bananas into Europe and USA," Mr Prowse said. "A lot of citrus moves out of the Southern Hemisphere, particularly South Africa all up into Europe and Asia. There are some apples moving out of New Zealand. But the only trade lane shown out of Australia is table grapes to China."

He also noted some of Australia's competitors such as South Africa are exporting much higher volumes; while only exporting less than 20 per cent to Asia, their total export the volume is over three million tonnes, meaning that it is still 600,000 tonnes of fruit being exported. That includes citrus that Australia competes with in Asia, particularly China.

Mr Prowse explained that year on year, generally, the unit price of fruit from Australia increases, but that does not mean everyone is getting more money because the mix has changed and more higher-value fruit such as mandarins, avocados and table grapes.

"When we take that value and put it to the volume and make it the total value, $1.5 billion exported from Australia is a record," Mr Prowse said. "The highest value in 2023 eclipsed our previous record in 2019. While the high-value bridge has driven that, we need to look at the economics rather than the fruit itself, in that, a lot of fruit gets pegged to the US Dollar, and last year it was the lowest it's been in 20 years at 65 cents. That meant there was more money for Australians in the exchange rate. Don't let it be lost on you that the lowest value of exports in the last 20 years was back in 2011 with the highest exchange rate, and the highest value in exports has coincided with the lowest exchange rate in 20 years."

Market access is another issue according to Mr Prowse, who noted that avocado exports are strong in non-profile markets like Singapore and Hong Kong, but there is currently no access to China, Vietnam or other key locations. While Mr Prowse says international fresh fruit and vegetable trade is ongoing work for governments and industry.

"There is market access work going on with government in all these markets," he said. "We can look here and say, we are trying to get access for summerfruit into Korea and Japan but there are challenges there because those countries don't import summerfruit from anywhere. So, we need to strategically think, are we going to grow in those markets even if we get access? In other areas, we have strong growth and good access and there's probably a good reason that we can't get access to certain markets. Cherries for example, New Zealand has a big cherry industry in our season - so chances of growth in that market is limited."

Over the past 20 years, Mr Prowse noted there have been many disruptions from the Global Financial Crisis, adverse weather events, high domestic prices, the high dollar value and low volumes - but in the last decade, things have changed.

"We have Free Trade Agreements, ASEAN dropped a lot of tariffs, the Korean trade agreement, the Japan trade agreement, and the biggest of all the China agreement, that's not forgetting previous Thailand and US agreements," Mr Prowse said. "Particularly, in the last 10 years, those agreements improved our trading relationship, we got access to table grapes into China as well as stone fruit in the 2014-16 era. Citrus had access from 2002, but we have been able to improve the conditions - and China took off."

However, in recent times it has been rocky relations with China, which Mr Prowse notes is slowly improving and normalising over the past 12 months. He says the country is a big producer and importer, but because of its huge population, imports are just two per cent of fruit consumption.

"We need to look at what they are actually importing," he said. "They are very low reliant on imports, but the imports that come in are high value, that is seen and perceived as better than their local production. It's a small niche, but it's big volumes. That's why China is good for us because they are prepared to pay a higher price. Australia is still a very small share of China's total fruit imports, even though they are our biggest market. So, out of all the trade lanes, what does China mean to Australia? It's less than two per cent of their total imports, but it's 25-26 per cent of our total exports. The biggest trade lane is grapes and is over $200 million, and is around 30 per cent of grape imports to China because it's counter-seasonal, they do grow their own grapes in-season."