WITH the dust settling on the outcome of the US election, Australian agriculture exporters are gearing up to face the possibility of getting caught in the crossfire of a trade war between the US and China if the Trump administration maintains its protectionist agenda.
Many exporters to China are holding their breath hoping president-elect Donald Trump will adopt a more moderate view on most things, including trade relations with China, while others have realised they now need a ‘Plan B’ business strategy.
‘Plan B’ is likely to see exporters gear up to quickly shift focus to other key markets such as the Middle East and North Africa, India and Indonesia, if their ‘Plan A’ target markets of China or the US are disrupted.
Australian agribusinesses have invested millions of dollars in recent years developing relationships, supply chains and distribution channels, particularly into China.
The Federal Government has also recently achieved historic free trade deal into this market.
We are currently heavily dependent upon exports to the US and China across many of the key segments including red meat, cotton and wool.
As exporters size up other opportunities, it is important to reflect on where our secondary markets are and who is competing with Australia in these secondary markets.
Figures from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) show that the value of Australian agricultural exports from 2010 to 2015 grew by 121 per cent to the US (from $2.36 billion to $5.22b) and 144pc to China (from $3.67b to $8.96b).
We have also achieved a healthy, yet less impressive growth in trade of 49pc to Middle East (from $2.10b to 3.12b) and 44pc to Indonesia (from $2.30b to $3.32b).
Over the past five years beef exports have increased from $820 million to $3.24b and from $16m to $736m to the US and China respectively.
In the same period Indonesia has grown from $136m to $233m and Middle East $77m to $352.1m.
Between 2010 and 2015 the value of Australian sheepmeat exports to China has increased from $47m to $290m, the US increased from $335m to $578m, while the Middle East has increased from $366m to $716m.
The main competitors for providing sheepmeat imports into Middle East are New Zealand and India, but Australia already provides about 70 per cent of imports.
China has consistently purchased approximately two thirds of our cotton production. Alternative markets of Indonesia, Korea and Thailand combined import 20pc of Australian cotton. Major competitors for cotton exports are the US, Brazil and Sub-Saharan Africa.
China also purchases approximately 75pc of Australian wool production. Another 15pc is split between India, Italy and the Czech Republic.
Our main competitor is New Zealand, exporting one third of the wool exports of Australia.
Replacing the Chinese demand for most our exports would require heavy investment in trade relationships and infrastructure.
We constantly see the difficulties in navigating these new markets and having a trusted and competent advisor can assist in establishing and maintaining a competitive foothold in these burgeoning segments.
For businesses developing their plans to shift export focus, PPB Advisory can help establish relationships and strategic joint ventures with wholesalers and distributors, develop supply chains, achieve preferred customer status and understand complex import protocols and quotas in key markets including Indonesia, India, Middle East and Northern Africa.
- Based in Sydney, Ben Mason is a senior manager at PPB Advisory. The firm offers professional advisory services to help businesses with their strategy and structure.