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Australia continues to lose market share in global agricultural markets

- Sunday, July 17, 2016
The latest review of Australia’s agricultural trade performance released by the Australian Farm Institute reveals that Australian agriculture is continuing to lose market share in global agricultural markets, as South American, Eastern European and Asian agricultural exporters capture greater shares of the growth in global agricultural imports.

The report highlights that over the period from 1996 to the end of 2014 (the latest date for which comprehensive global trade data are available) the value of global agricultural trade has grown at an average compound annual growth rate (CAGR) of 7% per annum. Over the same period, the value of agricultural imports by nations in Central and South Asia, ASEAN and Africa and the Middle East region have grown at a rate in excess of 14% per annum. 

Yet over the same period, the value of Australian agricultural exports has only increased by an average of 5.2% per annum, meaning Australian agriculture is continuing to lose market share.

On a region by region basis, the data shows that Australian agriculture is holding market share in the North Asia and Oceania regions, but underperforming in some of the fastest growing markets including the ASEAN, Africa and Middle East, and Central and South Asian regions.

The review reveals that part of the region for Australia’s under-performance lies in the fact that the largest growth categories of imports in the ASEAN and South Asian regions has been oilseeds and coarse grains, especially feed grains for livestock. Australia is not a major exporter of these products, especially given the limited availability of arable land suitable for cropping in Australia.



However, the review highlights that the main reason that Australian agriculture has lost market share is the limits that apply to land and water availability in Australia which prevent any major expansion in output occurring. In fact, it is likely that despite growing global opportunities, the value of Australian agricultural exports will be reduced in coming years due to a reduction in the size of the national cattle herd and sheep flock, and a reduction in dairy output caused by sharply reduced global prices.

The review reinforces once again the fact that Australian agriculture cannot realistically hope to increase production volumes in the short term, and nor is Australian agriculture cost competitive with the emerging agricultural exporting nations of Eastern Europe, Asia and South America. 

In addition, the proximity of Australia to fast growing markets in Asia provides only a limited advantage, because advances in the efficiency of global shipping, packaging that extends the shelf life of fresh produce and a global oversupply of shipping capacity has greatly reduced global shipping costs and extended the distance that fresh produce can be shipped.

The review results reinforce the need for Australian agriculture to increase the focus on increasing the value of agricultural exports, as well as the volume. Increased value can be generated by focusing on quality, biosecurity and safety, with Australia already having world-leading systems in place to address these requirements. 

The two main avenues available to increase volume are a lift in agricultural productivity, and the expansion of agriculture in northern Australia. Governments and the agricultural sector should redouble efforts to pursue both objectives. Neither of these will deliver immediate results, but will be essential to improve the long-term wealth that the sector generates for the Australian economy.

Copies of the Australian agricultural trade review can be accessed here.

 
Comments
Bryan commented on 20-Jul-2016 08:18 AM
Has the high Australian dollar been a factor in the lost market share ?

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