Special edition: Global food trade

Asia vital to future of Australian food exports

By Neil Merrett

- Last updated on GMT

Related tags: Cent, International trade, Export, Australia

Australia's food and beverage sectors dominate the
country's export market, but with global and regional trade
becoming increasingly competitive, their continued health is far
from certain.

The value of food and beverage exports for 2006 remaining on par with the previous year at Aus$24bn (€14bn), accounting for 15 per cent of Australia's total exported merchandise, according to a report from the country's Ministry for Agriculture, Fisheries and Forestry. If the country is to maintain these levels of food production, it will have to meet the challenges of expanding into upcoming lucrative markets like Asia, which are rapidly becoming more sophisticated in terms of demand. Besides the challenges currently facing the industry, the report did find some encouraging developments in the country's food exports to offset declining sales and the detrimental affects of adverse weather conditions. The value of processed dairy products was up for 2006 to about Aus$2.6bn (€1.5bn), a rise of 3 per cent, with a similar performance in wine value, which increased 2 per cent to Aus$2.8bn (€1.7bn). The demand for wine remains dominated by the US and the UK, each accounting for 30 per cent of Australian wine exports. Cereal foods also posted a strong year, with export values up 8 per cent to Aus$468m (€285m). However, the value of meat products, traditionally one of the country's strongest food exports with a 28 per cent market share, underwent some decline. The value of exported processed meats was down by 3 per cent to AUS$6.8bn (€4.1bn), with processed sea food falling even more dramatically by 12 per cent to AUS$577m (€352m). The overall success of the industry in attracting foreign markets is seen as an important sign of recovery from devastating environmental and health factors that hit the industry in 2003. Widespread drought and an outbreak of the SARS (severe acute respiratory syndrome) resulted in the value of food exports falling for that year by Aus$4bn (€2.4bn) to AUS$22.3bn (€13.6bn). Though the country may not have as yet fully recovered from these affects, increased interest in food and beverages from the emerging markets of Asia was seen as hugely significant factor in boosting sales. Indonesia has seen some of the largest increase in demand, now accounting for 6 per cent of the country's total exports, from just 2-3 per cent in 1990. Markets like Korea have seen a similar rise over the last 16 years to about 7 per cent, from 4 per cent. In order to fully reap the potential of Asia's food demands, the report stressed that Australia's food and beverage companies will have to adapt to challenges in the regions lucrative emerging markets. Rapid developments in Asia's retail markets and an influx of westernised companies and outlets are expected to make the market for exporters increasingly demanding in terms of price and quality. Growing competitiveness within the region is likely therefore call on greater cost efficiency in processing and production. Maintaining a strong presence in Asia's food markets will be vitally important to for the Australian food exports, with 2006 not being without its troubles. Economically, the year proved to be extremely difficult for Australian food exporters, with increased transportation and fuel costs putting further pressure on processors. This was compounded by the strong performance of the Australian dollar, which had an average value of US$.75 during the year, resulting in increased costs for imported ingredients. The long-term effects of these factors are yet to be fully realised, although the report found that the importance of its food industry was already seeing stiff competition from rivals sectors. The strong performance of Australia's mineral and energy sectors saw a 4 per cent decline in the total share of exports for the food industry, even though its value remained the same.

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