Huge China ag demand key to new Aus-China brand

Mining magnate and philanthropist Andrew Forrest has long had an interest – now commercial – in re-energising Australia’s agricultural potential, particularly given the “food bowl to Asia” goal.

Following a meeting with Chinese Premier Li Keqiang, which canvassed China’s concerns about food supply and security, Forrest proposed the “Australia Sino Hundred Year Agricultural and Food Safety Partnership (ASA 100)”.

The aim of the ASA 100 is to position Australia as the primary food and agricultural product solution to China’s long-term food security and natural clothing needs.

Launching the project today, Forrest noted China’s long term and predictable demand provided the basis for renewed investment and innovation in the sector.

That’s a view shared by ANZ, reinforced by major research projects such as “Greener Pastures” and “Feeding the Dragon”.

ANZ was the key banking participant in the launch of ASA 100. A preparation group will meet in Australia prior to the G20 later this year with a view to continuing to develop the relationship with China and establishing a single brand for Australian product.

The ASA 100 will comprise of 50 members from each country, including Federal, State and Territory Ministers, major food producers and distributors from Australia and China, including Provincial Ministers for each province in China and the National Minister responsible for food security, production and distribution.

In research prepared for today’s meeting, ANZ noted China’s food and beverage sector had recently surpassed the US to become the largest in the world. Exports of Australian agricultural products to China have doubled in the past five years to $7.3 billion in 2013.

China’s five year plans have proved extremely successful in lifting domestic agricultural production - five fold since 1978 - while continuing to tackle resource and environmental challenges. Despite this, while domestic production grows, China’s food import dependence doubled to almost 13 per cent from 2001 to 2012.

ANZ found that while Australia has the obvious potential to service this demand there continues to be a need for greater investment in the face of strong competition from competing agri producers including Brazil, the US and New Zealand.

Chinese consumers are seeking value products and there is a need for more advanced infrastructure in Australia to meet market and volume demands. Critically for Australia, finalised free trade agreements should seek to position Australian agri exports at least to the same level as those negotiated by competitor nations.

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As an example of the opportunity, ANZ forecast Australian wine exports to China could rise by 173 per cent by 2030, to $677 million. Over the same period, China’s demand for imported beef is forecast to rise by almost 250 per cent, to almost 4 million tonnes.

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The issue of food safety, and its true impact on the food buying choices of the Chinese consumer remains extremely important and it is to “safe” countries like Australia that this focus will increasingly be drawn.

For beef, dairy products, grain, lamb and mutton, sugar and wine Australia currently maintains an important place in China’s import market – whether through strong market share, high brand recognition, quality product reputation or growing cross border investment and supply chains.

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Other agricultural opportunities exist such as aquaculture, horticulture, rice and pulses together with an array of Australian processed food products.

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But the Australian agri sector needs to remain continually aware of the growing challenges it faces in remaining competitive in China. The issues of food safety, open investment environments, efficient infrastructure, facilitation of capital into agri projects, targeted research and development, promotion of skills and innovation and cross-border relationship building are all fundamental to the future prosperity of the industry.

Underlying this is a fundamental requirement: the need for all players, whether states or industry leaders, to come together to present a unified image outside our borders, so that consumers from China - and farther afield - continue to be fully aware of the unequalled quality and reliability of Australian product.

Michael Whitehead - Director Agribusiness Research, International and Institutional Banking ANZ.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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