At a high level, Australia continues to adjust the balance of different agri sectors, driven by varying factors including demand, investment and climate.
Record wheat harvests across the world have kept downward pressure on Australian prices outside of local drought years.
Despite increasing export tonnage to major markets like Indonesia and Vietnam, Australia’s share of value of these markets is under increasing competitive pressure.
Black Sea-region producers are serious competitors on world wheat markets, and while economic and structural issues are present, their scope for yield and cost of production improvements will assist to place their produce competitively in the international market.
Global beef consumption is increasingly reliant on imports and is driven by strong consumption growth in emerging markets.
South American beef is forecast to dominate global production as improvements in supply chain, quality and quantity of product continue.
Strong Australian production and stable consumption growth implies a large exportable surplus from the US, meaning continued competition for Australian beef. Around 70 per cent of domestic produce is destined to export markets – primarily to four countries (Jap an, South Korea, US and China) which account for over 75 percent of exports (both volume and value).
The global sheepmeat market is particularly unique in that Australia has only one major export competitor, New Zealand. Together, throughout 2017, Australia and NZ accounted for 71 per cent of global sheepmeat trade despite accounting for only 8 per cent of global production.
The NZ sheep flock, like Australia’s, has experienced a significant decline since the 1990s. Where Australian sheep farms gave way to wheat and cropping operations, NZ sheep farms were largely converted to dairy operations and, to a lesser extent, beef operations. In total size, the NZ flock is some one-third the size of the Australian flock, at around 27 million head.
In terms of competition, NZ sheepmeat is present in all of Australia’s top 10 export markets for both lamb and mutton, however New Zealand exports are heavily focused on two key markets, being China and the EU.
A shortening of supply of NZ sheepmeat and a redirection of product towards China has presented opportunities but Australia has been unable to fill the gap.
The EU market is a high-value premium-cut sheepmeat market for Australia, and the recent announcement of initial negotiations toward an Australia-European Union Free Trade Agreement that began in mid-2018 is welcome news for the industry.