Australia has recorded strong growth in international trade for 2018-2019, according to Rural Bank's newly released report, 'Australian Agricultural Trade'.
Australian agricultural exports enjoyed an increase in value for the ninth consecutive year, and reached a new record high value of $50.7 billion.
Australia's top five agricultural export markets all recorded increases in value for the past year. Unsurprisingly, China had the largest share in Australia's agricultural export market, purchasing $14 billion worth of goods. Japan was the second largest market, with $5.3 billion, followed by USA with $4.4 billion.
On-going trade disputes between the US and China have negatively affected the wool industry. Greater tariffs imposed on Chinese clothing exports to the US, accounting for 15 per cent of clothing manufactured by China, resulted in a declining demand. Despite this, wool remained the largest export product to China. As global economic uncertainty persists, the decline is expected to continue.
Australian red meat exports increase in both volume and value, with a record growth of $1.9 billion, or 18 per cent. Drought-induced destocking increased domestic production at the cost of eroding the already quite low national cattle herd.
The value of the Australian sheep industry reached a new record high of $4.3 billion and solidified the nation's position as the top exporter of sheep meat. Currently Australia is the world's largest exporter of sheep meat, accounting for 33% of global exports. China overtook the Middle East and North Africa (MENA) as Australia's largest export market, however prices to the US were, on average, 2.3 times high than China.
"Lamb remains a niche product in the US but is growing in familiarity, particularly among millennial consumers through food service channels." There is a lower export volume expected in 2019-2020, however prices are expected to be supported by strong demands.
Exports were also supported by the weakening of the Australian dollar, which averaged 71.6 US cents during the year. Interest rate differentiation between Australia and the US drove this outcome and was assisted by falling house prices and a dip in consumer confidence. It is expected the Australian dollar will slip further, towards 65 US cents, if these factors continue.
Some commodities have benefitted from the reduction in US exports to China, but largely the trade disputes are causing a slowdown to both their own economies, and those which rely on them for exporting their goods. As China and the US are in the top five export markets for Australia, a weakening demand for premium agricultural goods could be on the horizon if the markets don't correct.
Unfortunately, South Australia bucked the national trend, reporting a decline after five years of strong growth. The decline of value ($856.1 million) was spurred on by a 57 per cent fall in wheat exports.
This was due to dry conditions which lowered the state's production. Australia is currently battling lower international crop prices, especially with respect to Argentina and The Black Sea.
However, there was growth recorded for wine, seafood, wool, mutton and almonds.
Tuna was a standout product for the state.
"Tuna from South Australia was the most valuable fish export commodity at $123.8 million."
South Australian wine is going strength to strength, and wineries can expect an increase in growth potential.
"Australian exports to the UK are supported by an agreement made in January 2019 that will ensure the trade commitments with the UK remain unchanged post-Brexit. European competitors currently do not have a similar agreement with the UK, which could potentially create greater opportunities for Australian exports."
Despite challenging climate conditions, trade wars and weaker consumer demand in China, Rural Bank insists "farmers should take confidence in long-term growth... [the] demand for quality food and fibre from Australia."
"Long-term prospects are encouraging."
For a more in-depth analysis, you can find Rural Bank's report, 'Australian Agricultural Trade' 2018-2019 here.