Australian and international farm policy news

Crimea river of gas

The political cesspool that is Eastern Ukraine continues to seep its way into Australian agriculture. In August, Russia enacted retaliatory sanctions against a host of NATO aligned members including Australia with beef and butter exporters hit hardest domestically.

Overall, ramifications are expected to be mild, although pressure will be put on Australian exporters to expand their presence in ASEAN and other regions in order to offset the loss of Russian trade.

Nevertheless, analysts are turning their focus to fertiliser markets connected to Russian gas supply. The agricultural sector is now one of many concerned with European dependency on Russian gas.

The ongoing conflict has galvanised efforts by European governments to reduce the reliance Russian gas imports. In light of the crisis, the United Kingdom’s former climate and energy security envoy, Rear Admiral Morisetti said:

Recent events in Ukraine and the Middle East have served to highlight the vulnerability of our energy supplies and the political straitjacket that results from our over-dependence on fossil fuel imports from these volatile regions.

The quickest and most effective form of energy security is to use less, EU leaders are currently discussing whether to mandate energy efficiency improvements of 30% by 2030; studies show that we can go to 40% without incurring economic penalties, and Ukraine shows that we must.

Although these measures will do little to dampen immediate volatility of input prices, precipitation of European measures to stabilise the market in the medium to long term could emerge as an unforseen benefit from the turmoil.    

Short term, there remain fears that supply into Europe will be cut off causing a ripple effect across energy and fertiliser prices around the globe. Governments, particularly in eastern bloc countries have been stockpiling in response, however risk remains that Australian farmers could see input prices nudged higher before the crisis is resolved.

Canada winning the legume race to Delhi

Gather all ye vegans and lovers of filling albeit vaguely unappetising foodstuffs – ‘dried, shelled leguminous vegetables’ are shaping up as the agricultural commodity to watch as free trade talks with India ramp up.

Size and composition of agricultural trade into India is significantly different from the East Asian agreements just inked. Beef and dairy exporters will be less of a priority during these negotiations. Of the US$511 million in agricultural exports to India last year around US$200 million (40%) were dried legumes.

Figure 1:  2013 Indian imports of dried legumes.

 

Sources:     UNcomtrade data, tabulated by AFI.

Currently imports from major exporters incur tariffs between 30–50% depending on the product. Australian legume producers could expect to feel a tailwind should these tariffs be eliminated. So too could overseas competitors like Canada – currently India’s largest legume import partner. Official Indian figures reveal Canada supplied 32% of dried legumes imports, over double Australia’s 15%.

Future market composition of Indian legume imports will depend in part on how the current Indian FTAs negotiations pan out. Canada and India completed their eighth round of negotiations in June 2013. Lodged in the proposed agreements is a separate arrangement regarding pulses.

Specifically on pulses, India agrees to reduce tariffs to free over a five year period, with the reductions done in equal annual stages from the date of entry into force of the agreement Canada’s market share is set to increase.

This arrangement would deliver significant advantage to Canadian producers. However, the Canadian-Indian agreement has been marked by delays and there are no sure bets on the ratification date. A lengthy delay would favour Australian pulse producers should a similar clause be jammed into the Australian FTA.

Tony Abbot’s hope of a free trade deal signed by the end of 2016 could bestow local pulse suppliers with an unlikely demand boost from their largest export partner.

Keep up-to-date with discussion on current issues in Australian and international agriculture policy via the Ag Forum on the Institute website.

Images:  CSIRO, USDA

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