Australia is back on the world stage

Due to various factors, Australia has only played a limited role on the international market since the early years of this century. In recent years, however, exports from Australia have started flourishing again. Larger volumes were exported, and they are mostly focusing on the Asian market.

South African winegrowers are complaining that the increased Australian export of wine has ruined the market. Whether the increased wine export is indeed the cause of the problems of the South African farmers, is difficult to prove. The fact is that both are true. Australia saw its wine exports increasing, and South African winegrowers got in such trouble that vineyards were grubbed up. These winegrowers are deciding to switch to growing more lucrative crops, such as table grapes and small citrus. These markets are still profitable.

Wine isn’t the only Australian product taking the global market by storm. Investments are also being made for the export of fresh fruit and vegetables. In 2015, the total fresh produce export amounted to 1.9 billion Australian dollar, about 1.35 billion euro. By far the largest share of the export value, 44 per cent, was taken up by nuts. Fresh fruit was good for 628 million Australian dollar (446 million euro), and good for 33 per cent of the export. Fresh vegetables amounted to nine per cent of the export value, which is 173 million Australian dollar, or 122 million euro. The remaining 14 per cent consisted of processed fruit and vegetables and other fresh products. These final categories also include products such as olives, orange juice and flowers.

More than half the export was destined for the Asian market. This market brought in 58 per cent of the export value. That percentage corresponds to 905 million Australian dollar (643.4 million euro). Calculated into volume, Australia exported 341,691 tonnes to this continent. The export mostly consisted of oranges, 105,764 tonnes. However, grapes represented the largest value with 208.4 million Australian dollar (148.2 million euro). Europe was the second most important sales market with a share of 16 per cent. The top three products for this market ranked in value, however, were nuts: almonds, walnuts and macadamias. Ranked by volume, onions take over second place from walnuts with 24,744 tonnes. Third position on sales markets was for the Middle East. Of the 88,806 tonnes exported to these countries by Australia, more than 48,000 tonnes were carrots. Other products transported to the Middle East in large volumes are: grapes (7,429 tonnes), oranges (6,791) and muskmelons (3,714 tonnes).

Citrus and grapes are by far the largest export products. Combined, these categories are good for 75 per cent of the export volume. Cherries, summer fruit, mangoes, avocados, apples, pears and blueberries follow with smaller volumes. In vegetables, carrots, potatoes, onions and asparagus are top of the export list.

The general export figures of Australia for fruit and vegetables, as reported by the ITC’s Trade Map, shows a rising line for the export of both product groups. After a slump in 2013 and 2014, the export of vegetables recovered in the past two years. Last year, the export value amounted to 1.5 billion euro. Fruit shows a stabler trend. Since 2012, the export value has only increased. Between 2014 and 2015, the export value even made a jump of almost 425 million euro.

Australia is mostly a competitor of other exporting countries on the southern hemisphere. The importance of Australia is rapidly increasing. Since 2010, export rose by 108 per cent to 416,380 tonnes. Because of that, Australia is in the list of fastest growers, but it remains a small player on the global market. The largest fruit exporter of the southern hemisphere is South Africa with more than three million tonnes, closely followed by Chile. However, this half of the world has multiple countries that show a considerable growth in the export of fruit. Besides the largest exporters still see their volume increasing, Peru and New Zealand are also doing well. The export of these countries increased by 157 per cent and 55 per cent, respectively, between 2010 and 2016.

In relation to the major demand from the northern countries, and especially for products that aren’t available year-round in that part of the world, all producing countries combined are small on the southern hemisphere. “We see seasonal products such as citrus, grapes, cherries and summer fruit are the most profitable export products,” says Wayne Prowse from Fresh Intelligence Consulting. That is partly thanks to the fact that there are no trade barriers, such as levies, for these products.

“During the export season, these products don’t compete with local products, and Asia’s potential remains large.” The Asian market is attractive because the transport time is 14 to 16 days within the same time zone per boat. Via air, many markets can be reached within a day. On country level, the focus on the Asian market is very visible. For both fruit and vegetables, the top ten mostly consists of Asian countries.

Markets in Europe and North America only offer opportunities for niche and seasonal products. “For example, we were pioneers for southern citrus in the US, but because South American countries also gained access to that market, Australia’s market share dropped,” Wayne explains. There are just some options left to export small volumes of premium Navels and tangerines to the West Coast. There’s a small programme of Pink Lady apples to the UK in September. That supply bridges the end of the European season and the start of the South African season. “Occasionally we export citrus and grapes to Europe, but compared to other countries in the southern hemisphere, those volumes are only small,” Wayne says. Europe and North America are good for less than three per cent of the Australian fruit export.

An additional boost for exporters are the free trade agreements the country has with China, Japan and South Korea. By now, the country has made a number of trade agreements within the region. For example, there are agreements with Singapore, New Zealand and Malaysia. And the country is still negotiating with the Gulf States, India and Indonesia, among other countries. Besides, Australia signed TTP, the trade agreement between countries surrounding the Pacific. 

In 2014 and 2015, the agreements with China, Japan and South Korea were signed. Tariffs on the export of fruit and vegetables disappeared because of that. The agreement with South Korea became effective in December 2014. The agreement with Japan followed a month later. This accord immediately ended the import tariffs on a number of products, and ensures a gradual reduction of tariffs on grapes, citrus and onions over a period of 16 years. The treaty with China became effective in December 2015.

For the fruit growers, the trade agreements are good news. IbisWorld calculated that the export of fruit has increased by 19.9 per cent every year for the past five years. Vegetable growers also saw export increasing annually, by 8.9 per cent over the same period. Especially the growth in the export of asparagus was considerable. Between 2014 and 2015, the export value to South Korea increased by 123 per cent. The tariffs were decreased by 27 per cent, to nine per cent. Since January 2016, the tariff has been completely abolished.

Although not all tariffs have been abolished by far, the exporters are working on building relationships in the various Asian countries. The tariffs are not necessarily a barrier for export. Despite import levies from China and Japan on grapes, export rose significantly. During the 2014 export season (January to October), the counter remained stuck at an export value of 600,000 dollar, but during the following season that value shot up to 1.6 million dollar.

Growers in Australia are adjusting production to the global market. Profitable crops, such as mangoes, are planted for export to China, where the fruit has considerably higher returns than on the domestic market. This export flow has doubled in size since early 2015, and import levies dropped from 15 to 9 per cent under influence of the free trade agreement. For the coming years, a further growth of export is expected. After a few difficult years, Australia is now back on the world stage.

“Australian growers and exporters are constantly looking for new markets, and export is becoming a priority for some Australian growers,” says Garry Langford from Apple and Pear Australia (APAL). That statement is confirmed by export figures for apples and pears of the past year. Especially exporters of apples managed to increase the volume.

Last year, the export of apples reached a record high for the first time in ten years. Although the figures of December hadn’t been published yet, the export of apples was on course of reaching 5,200 tonnes. That would have been the largest volume since 2006. “In recent years, there has been a strong focus on the domestic market,” Garry says. “Australian growers see more and more export opportunities for their future to maintain a profitable company.”

The UK topped the list of export markets for apples. The country earned that position by importing 1,300 tonnes of Pink Lady apples in the months of August and September. That was also the best result for export to the UK since 2006, and it was 90 per cent higher than the year before. Factors that played a part in this were the decrease in value of the pound after Brexit, less import from other countries, and a marketing campaign for Pink Lady.

However, the focus is on the Asian market. For Australia, the opportunities are on the niche markets in Asia. “Production costs are high in Australia,” Garry explains. “But the growers produce a quality product that often fetches good prices.” India, Taiwan and Thailand were the most important export markets, with between 150 and 200 tonnes each. China, New Zealand, Chile and the US are the competitors on the apple market. These countries have larger volumes available, and supply the bulk of the apples.

Export to China was disappointing and decreased from 204 tonnes in 2015 to 79 tonnes last year. Besides an enormous domestic production of 40 million tonnes of apples, China still imports an additional 70,000 tonnes of apples. Of that, the majority is supplied by the US and New Zealand. However, Indonesia turned out to be a promising market. Export increased by 176 per cent, to 634 tonnes. With it, the export recovered after three years in which trade measures set the pace. The export to Malaysia also doubled, to 261 tonnes. The United Arab Emirates were good for 410 tonnes of apples.

The pear market is decided by Indonesia. The group of islands is good for 40 per cent of export, which amounts to 4,200 tonnes of pears. In the past year, the market grew by 70 per cent. Australia profits from the increased interest in European pears in Asia. Traditionally, these countries know the Asian pear. For that matter, Australia doesn’t have access to China with the pears yet. But it’s expected that this market also offers opportunities, because the European pear is popular there as well.

The traditional pear markets, New Zealand and Canada, failed somewhat last year. For both countries, export decreased by 20 per cent, and amounted to 2,215 tonnes and 998 tonnes. The general export trend also showed a slight decrease, and remained on 10,056 tonnes.