Free Trade Agreements define the way our agricultural exporters do business

An ABARES Insights paper explores how Australia’s agricultural export performance over the past 15 years has been supported by the proliferation of free trade agreements (FTAs).

Stocktake of Free trade, competitiveness and a global world: How trade agreements are shaping agriculture looks at the history of Australia’s FTAs and how they have assisted with our export competitiveness and the growth of agricultural exports.

Head of ABARES Agricultural Forecasting and Trade Dr Jared Greenville said 81 per cent of Australian agricultural exports are now destined for countries with which Australia had a preferential trade agreement.

“The importance of FTAs to Australia’s agricultural export performance cannot be overstated,” Greenville said. “The value of our agricultural exports to countries with which we have an FTA is estimated to be about $39 billion in 2019/2020.

“Over the past 15 years they have provided access to new and growing markets and have supported the competitiveness of our products abroad.”

There are only a few major trading partners that remain with which Australia does not yet have a preferential trade agreement. These include the European Union, the United Kingdom and India. Negotiations with these trading partners are underway and the pursuit of FTAs with new partners will remain of key importance to Australia’s future trade agenda.

“Negotiating FTAs and maintaining their gains requires significant effort and investment,” Greenville said.

“FTAs are a long-term investment, for example the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) which came into force 5 July 2020.

“By 2050 Indonesia is projected to be the world’s fourth largest economy, with its per person consumption predicted to be greater than China for key commodities such as cereals and beef.

“Australia’s agricultural exports are poised to benefit greatly from this projected rapid growth and the preferential access we have secured with this important trading partner.”

The report notes that once an agreement is in place, parties to it cannot be complacent.

“Once we get an agreement some of the gains can be eroded as new countries also negotiate agreements with our trading partners,” Dr Greenville said.

“It’s important for government to keep working on securing progressive advances like technical market access for products under the agreements to help realise the potential benefits.”

Greenville said FTAs can help buffer Australian agricultural exports from shocks and disruptions such as COVID-19.

“FTAs provide options for exporters and help them manage risks in markets without having to overcome tariff and other barriers when shifting products between markets,” he said.

The report notes Australia is now among the top 15 agricultural exporters in the world, with the sector exporting about 70 per cent of production to 192 countries.

“This success on the world stage could not have been achieved without government and industry partnerships to secure market access in global markets,” Greenville said.

“Ultimately the priority for the Australian agricultural sector will continue to be about having access to export markets and being competitive in those markets.

“Ensuring Australia provides access to imported products will also be important for the competitiveness of our domestic industries.

“The negotiated removal of trade barriers, whether through our own FTAs or through those between other trading partners, will continue to support more efficient global value chains and a more liberalised global trading landscape,” Greenville said

Australian agriculture exports stay strong during COVID-19

Australian Bureau of Agricultural and Resource Economics and Sciences’ (ABARES) latest Insights report confirms that our agriculture exports have stayed strong during COVID-19 despite disruptions to supply chains and logistics.

‘Analysis of Australian agricultural trade and the COVID-19 pandemic’ released today (5 June) finds that government and industry’s nimble response to rapidly changing market conditions has been critical to ensuring the strength of Australia’s trade profile.

Co-author and ABARES’ Head of Forecasting and Trade, Dr Jared Greenville, said this positioned Australia well to take advantage of opportunities during the global economic post-pandemic recovery.

“Supply chain and logistics disruptions observed in the early stages of the pandemic are benefiting from government and industry responses, and despite the risks, overall export performance has remained strong,” Dr Greenville said.

“While seafood exports experienced a significant decline in February 2020, March saw a slight rebound in export values for crustaceans and molluscs.

“The government acted quickly to establish the International Freight Assistance Measure.

“We saw government and industry respond to labour challenges, through, for example, visa extensions and permission for agricultural workers to stay with one employer for a longer period.

“Importantly, government has safeguarded the continuation of services that facilitate trade, such as certification, accreditation and other regulatory services, to ensure exports and imports still flow.

“Live animal exports are a watch point as the pandemic evolves, as demand from Indonesia and Vietnam declines, but export values remain above the five-year average.”

Greenville said while the pandemic precipitated a global economic downturn, it was unlikely to have a significant impact on demand for essential food products.

“This persistence of demand was seen during the Global Financial Crisis when agricultural trade remained steady,” Greenville said.

“But not all products from the agriculture, forestry and fisheries sectors are essential items.

“As economic activity declines and global incomes are reduced, products consumed through more discretionary spending have been more significantly affected.

“These include high quality foods for cafés and restaurants. These effects were seen for seafood where the outbreak in China has been estimated to have led to a fall in export earnings of around $200 million in 2019–20.”

The pandemic is also driving some changes that will likely remain part of the future trade landscape.

These include shifts in consumers buying more online, higher demand for stable and safe food, a greater awareness of supply chain risks, increased use of digital trade systems and the risk of creeping protectionism.

“The prospects for recovery for Australian agricultural trade are good,” Dr Greenville said.

“Australia’s agricultural sector and trade profile have a long history of adaptation, evolution and growth in the face of external challenges and pressure.

Export legislation aimed to make food exporting easier

A draft of a Bill introduced to parliament – the Export Control Bill 2019 – is designed to strengthen the competitiveness and productivity of Australian agriculture.

Minister for Agriculture, Senator Bridget McKenzie, said the Bill would make it easier for exporters to do business by untangling existing legislation and allowing for the certification of a broader range of goods.

“Agriculture, fisheries and forestry exports are an economic powerhouse for Australia, expected to be worth around $51 billion in 2019-20,” McKenzie said.

“As a premium and reliable producer of clean and green goods we have a competitive advantage—but it’s an ever increasing and changing marketplace and drought is adding considerably to the challenge.

“We need sharp and sensible export legislation that backs our farmers to ensure they can fully capitalise on lucrative export opportunities.

“This Bill provides clearer regulation that supports innovation and the export of a broader range of goods while ensuring that regulatory settings maintain the standards our trading partners expect.

“It also provides stronger deterrents for that tiny minority who might consider ignoring their legal responsibilities. It includes clearer monitoring and enforcement powers, new criminal offences and increased penalties for those who choose to flaunt our laws.

“This Bill protects the businesses of our exporters who do the right thing and punishes those who threaten to undermine Australia’s trading reputation.”

McKenzie said in the 37 years since the Export Control Act 1982 commenced, the legislation had ballooned into a complex web of regulation.

“This Bill consolidates export certification provisions that are currently scattered through about 20 Acts and 40 pieces of subordinate legislation,” McKenzie said.

“In refining our export legislation, our Government has worked hard with importing countries to provide assurances that our level of regulatory oversight remains the same.

“We’ve also consulted widely with industry and stakeholders to develop a legislative framework that’s modern, supports innovation, is easier to understand and champions our clean and green status.

“This Bill is just one of many Liberal and Nationals Government initiatives to support agriculture’s goal of becoming a $100 billion industry by 2030.”

How global exporters are keeping up with demand

Regardless of whether Venetian explorer Marco Polo really was the first to introduce pasta to Italy in the thirteenth century, food has been exported for thousands of years. For example, the UK has become heavily reliant on imported goods. In the first half of 2018, it imported $43 billion worth of food, with a proportion of five billion pounds of imported meat. In most towns, there is a corner shop that sells imported foods and supermarkets now have ‘world’ food aisles. With a rise in demand for globally imported foods, how do food manufacturers keep up with the demand for exported produce? Here, Darcy Simonis, industry network leader for ABB’s food and beverage segment, explains.

Attitudes to cultures and foods has changed. More than 15 years ago, global foods were not as widely accessible as they are now. From Asia and eastern Europe, to Africa and the Caribbean, it is now as easy to buy foods from these parts of the world as it is to buy domestic products from the country you live in.

Merging travel with cultures
Travel has developed significantly, opening more opportunities to experience different cultures and food, and as a result, cultures are merging. The convenience and appeal of being able to explore more places around the world quicker than ever, means that we are subject to a variety of different cuisines that we want to be able to enjoy at home. As we have become more accepting and adventurous to try foods from different countries, it’s become fashionable to embrace other cultures and experience their food, increasing the demand for exported food.

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Automating your plant
With these factors influencing the desire for foods from around the world, companies need to increase production and enable efficient processing to meet the demand. For instance, Hungarian company, Tisza-TK Projekt has used automation to increase production, decrease operation costs and sustain minimum waste and emissions of its corn grain processing factory.

The new Tisza-TK Projekt factory produces 530,000 tons of GMO-free corn a year and exports 70 per cent of its high fructose products. As the Hungarian government plans to extend the output of local agriculture and increase the value added by processing more crops locally, the new factory is considered a huge contribution to the growth of the Hungarian food industry.

In order to process this amount of corn and operate an energy efficient plant, Tisza-TK Projekt has implemented ABB’s System 800xA Version 6.0 . The system integrates plant utility processes and the process control system, energy monitoring and medium voltage automation.

Automation provides many benefits that allow manufacturers to be able to supply to demand. In particular, System 800xA Version 6.0 allows organizations such as Tisza-TK Projekt to automate processes including packaging, labelling and mixing, enabling it to increase productivity, improve energy efficiency, while reducing waste and emissions.

Whether or not Marco Polo was the first to export pasta, this historic myth has certainly made an impact on the way the food and beverage industry operates. Although, certain types of food manufacturers have no choice but to export their produce, all manufacturers should consider exporting as wider markets can be reached, increasing productivity and sales. However, without automation, manufacturers risk losing their place in the market to growing competition. As travel and popularity of global foods develops, manufacturers will heavily rely on automation to help meet the demand.

NSW’s best invited to Fine Food Australia table

NSW food and beverage companies are being offered a chance to expand their business in national and global markets with a subsidised place on the NSW Government’s stand at Fine Food Australia.

Executive Director Industry Trade and Investment, Kylie Bell, said a dozen spots are up for grabs on the NSW stand at the southern hemisphere’s largest food and beverage show.

“Over 1,000 exhibitors and 26,000 visitors from 50 countries attend Fine Food Australia, providing a huge opportunity for NSW companies to win new business.

“We’re calling on regional and metropolitan companies that can showcase the great depth and innovation that is occurring right across our food and beverage industry.

“For exhibitors, Fine Food Australia will be a massive chance to meet leading suppliers, negotiate deals, expand networks, and learn the latest ideas and trends,” Ms. Bell said.

NSW’s food and beverage manufacturing industry has 3,600 businesses that employ nearly 70,000 people – almost a third of the national industry – with exports growing 9.6 per cent in 2017-18 to reach $5.6 billion.

“Fast-growing middle classes in emerging countries, particularly in Asia, are clamouring for our clean, green and safe food and beverage products,” Bell said.

“To capitalise on this demand we’ve launched the NSW Food and Beverage Industry Development Strategy to grow the industry, build business capability, improve collaboration among key stakeholders and drive job creation, skills development and investment.”

“By participating in Fine Food Australia and implementing this strategy, we’re backing the industry to tackle the challenges and opportunities posed by new technologies, the availability of skilled labour, diversifying consumer tastes, growing global demand, and access to markets,” Ms. Bell said.

Fine Food Australia 2019 will be held at the International Convention Centre at Darling Harbour from 9-12 September.

Innovative food and beverage companies can apply from now until 26 April for a spot on the NSW stand by visiting Fine Food Australia 2019 with successful companies to be notified in May.

Countries place value on different aspects of food products, export advisor says

Making a few changes to marketing campaigns and packaging could help a product succeed in an overseas market, according to Export Connect director Najib Lawand.

Lawand spoke to business owners at an export forum during the Fine Food Australia expo in Melbourne in mid-September.

Having worked in the food and beverage industry for 20 years, across the public and private sector, Lawand helps companies make the right decision when it comes to moving into an overseas market.

Speaking to Food and Beverage Industry News after the forum, Lawand explained the differences between Australia and overseas markets.

READ: Fine Food Australia expo in Melbourne showcases the country’s best

Common trends across Australia and other markets include a focus on health and convenience, but portion sizes need to be different in different markets, he said.

Ready-to-go and pre-prepared meals are also appealing to an increasing number of consumers across all markets, he said. “People want to have the feeling that they’ve cooked.”

But, within the precooked meals and ready-to-eat foods categories, Australian exporters may need to adjust their product’s portion and packaging sizes, said Lawand. 

“The main difference is that in Asia they go for smaller pack sizes, whereas we go for bigger pack sizes.

“They have small fridges, small pantries. Often the apartments are smaller and suburbs are more compact.

“It’s not just about what you do with the products in terms of packaging. To succeed, you need to do your homework and build your business model around it,” said Lawand.

Another big difference is how a product is sold. In Australia it is common to shop in-store, whereas in Asia e-commerce is very big.”

When looking overseas, businesses should think about e-commerce, which also helps to cut out the middleman, he said.

Asia and the Middle East are favourable regions for food and beverage exports, said Lawand. 

“Asia and the Middle East have great opportunity because there’s a demand for allnatural products which also have a quality angle and a trust element.

Healthy and free-from products are gaining in popularity around the world, and in particular in these regions.”

Australia’s clean, green environment gives companies a reputation that appeals to these markets, he said.

“They see Australians as living healthy lives.”

Many Chinese consumers and other Asian markets want to explore Western food, said Lawand.

Asian markets are especially appealing for Australian businesses because of the increasing value placed on Australia’s food standards in this region, he said.

It is also a natural extension when commercial capacity has been reached on the domestic front. For many Australian suppliers, especially larger producers, their market has reached top growth, and that’s when they start looking offshore.”

Overseas markets are virtually limitless as hundreds of millions more consumers can be reached, said Lawand. 

This is especially so in regions of high growth, such as Asia. “Urbanisation is quite rapid in the Asian market, so there are more shopping centres, apartments, office buildings, supermarkets, convenience stores and cafes,” he said.

However, it comes with its challenges.

“We recommend Singapore because it’s easy to get into, but they only have a couple of million people.

“You can go to China too, but meeting compliance and getting through CIQ (China Inspection and Quarantine) is very difficult. If you are very well connected that’s where you will have the most opportunity,” said Lawand.

To succeed, Lawand suggests considering packaging, marketing and retail distribution methods on a case-by-case basis.

People without established connections can either put in the legwork to make it happen, or employ the services of those who have already, and can help build a connection to those markets, said Lawand. 

Global consumption of poppy seed set to continue increasing in next decade

The global poppy seed market is set to grow within the next 10 years, as there has been an increase since 2012.

In 2016, 111,000 tonnes of poppy seeds were produced, which was up by 6 per cent from the year prior, a report published by IndexBox explains.

The World: Poppy Seed – Market Report, Analysis and Forecast to 2025, shows and increase across the globe, after a noticeable slump in 2012.

The market fluctuated over the next four years within an overall upward trend.

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In value terms, the global poppy seed market had total revenues of $183.4 million in 2016 in wholesale prices, which was about at the level of the previous year.

Prior to that it fluctuated wildly due to price changes reflecting yields of poppy.

That figure refers to the total revenue of producers and importers, excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price.

India, Germany, Hungary and the Czech Republic were the leading consumers of poppy seeds.

India, accounting for 14 per cent of global poppy seed consumption in 2016, the Czech Republic and Germany accounting for 9 per cent each, and Russia and Hungary accounting for 8 per cent each.

The highest annual growth rates of consumption from 2007 to 2016 were recorded in Hungary, with 11.6 per cent growth.

India and Poland followed with 8.8 per cent and 7.2 per cent growth, respectively.

Following robust consumption growth rates, India significantly strengthened its share in terms of global poppy seed consumption from 12 per cent in 2007 to 19 per cent in 2016.

In the European market, poppy is used mainly by the food and confectionery industry, while in the largest poppy consuming country – India – it is a popular spice and an integral ingredient in the preparation of some national dishes.

The market is largely determined by the supply of poppy, the yield of which is subject to strong fluctuations due to adverse weather conditions.

The need to obtain licenses for growing poppy, as well as strict control over its production, also limits the expansion of production.

But, the population growth contributes to the growth of the food industry, which in turn will ensure the growth of poppy consumption.

The world poppy market is expected to grow for the next ten years at a rate of 1.2 per cent per year.

This will bring the market to a level of 123,000 tonnes by 2025.