China trade partner for Aussie ag commodities
China has been open to the global market since 1949. Today, it’s the second largest and one of the fastest growing world economies.
But China is heavily reliant on millions of tonnes of fresh produce imports to feed a population of 1.4 billion which is expected to grow to 1.9 billion by 2050. 1
ANZ Bank concedes that this presents serious and complicated challenges in which Australia can play an important role. During their recent delegation of sheep and wool producers to China, ANZ’s delegates were reminded that China remains our most important trading partner for almost every ag commodity and is likely to remain so in the foreseeable future, despite Australian agriculture seeking new markets and commodity trading partners. 2
Australia’s reputation for safe, high-quality produce is renowned. Of the $48 billion generated from Australian food and fibre exports, China represents nearly $12 billion (24%) making it our most valuable export market for sheep and wool, dairy, fresh produce and a significant trading partner for beef (along with the USA).
Wheat and grain
Compared with other global exporters such as the Black Sea region 3, Australian food and fibre are considered high quality and Chinese consumers apparently prefer to buy our produce ahead of other suppliers, even if it does not yet translate to higher prices. Overseas governmental subsidies to shift grain tonnage are difficult to compete with when our point of difference is quality (pest free high protein), not quantity, especially in light of Australia’s longstanding drought affecting output. This month, the Department of Agriculture and Water Resources was reported as assessing 11 applications to import bulk grain into Australia due to drought-devastated crops. The applications apply to canola, wheat, corn and sorghum. 4
Sheep and wool
Two commodities benefiting most by trading with China are sheepmeat and wool. Sheepmeat consumption in China is growing, fine wool is finding a place in products that satisfy consumers wanting quality, natural fibres and superfine wool is used to produce premium sports and lightweight, weatherproof casual apparel.
According to ANZ Bank, Australia is the only country that can realistically supply China’s future demands for these commodities. As an aside, China is bolstering its domestic sheep industry with genetic breeding and feeding programs, environmental management and animal welfare thanks to Australian knowledge-sharing and expertise.
Recognising emerging trends across the supply chain
It would seem that China has a major part to play in helping Australia’s aim to reach $100 billion in ag output by 2030. 5
Australia’s dependence on China should also be noted, says ANZ Bank, as it presents a risk that needs to be managed, requiring understanding of what motivates government, regulators and consumers.
On the Western Downs, we have seen sheep farmers getting better prices for their sheep and wool, but these prices are still offset by high feed bills from the ongoing drought.
Interestingly, we’re starting to see sheep producers trying to get into new markets with a couple hundred ewes and then feedlotting and selling lambs at a certain weight. Feedlotting has traditionally been a cattle dominant practice but, with the price the way it is for lambs, farmers are diversifying with lamb feedlotting.
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- Blazhevska, V. (2017). World population projected to reach 9.8 billion in 2050, and 11.2 billion in 2100 – says UN – United Nations Sustainable Development. [online] United Nations Sustainable Development. Available at: https://www.un.org/sustainabledevelopment/blog/2017/06/world-population-projected-to-reach-9-8-billion-in-2050-and-11-2-billion-in-2100-says-un/ ↩
- Thesbhub.com.au. (2019). [online] Available at: https://thesbhub.com.au/content/dam/anz-smallbusiness/downloads/AGRI-Commodity-Note-Edition-9.pdf ↩
- Aegic.org.au. (2019). [online] Available at: https://aegic.org.au/wp-content/uploads/2016/09/Russia-wheat-industry-Implications-for-Australia.pdf ↩
- Sullivan, K. (2019). Australia to import grain for the first time since 2007. [online] ABC Rural. Available at: https://www.abc.net.au/news/rural/2019-05-15/australia-approves-grain-imports/11113320 ↩
- Internet, C. (2019). New future foods focus propels agriculture’s $100 billion vision < Media Releases National Farmers’ Federation. [online] Nff.org.au. Available at: https://www.nff.org.au/read/6364/new-future-foods-focus-propels-agricultures.html ↩