Tuesday, December 8, 2020

China boycott to hit Australian wine harder than expected as fruit and vegetable prices rise


Australia may be able to divert a “limited amount” of wine to its allies in the UK and the US, but China’s tariffs will probably reduce the value of exports.

That is the conclusion of the Department of Agriculture’s Abares commodities report, released on Monday, which lists trade tensions as a dark spot in an otherwise recovering industry.

The report also warns that fruit and vegetable prices are expected to rise in Australia due to Covid-19 travel restrictions limiting labour available for harvesting.

Prices of summer vegetables, stone fruit, apples, pears, and table grapes are forecast to rise by between 15% and 25%.

By some estimates commodity markets exposed to China trade tensions are worth $19bn, with services worth a further $28bn of exports.

The Abares report argues that the causes of trade tensions with China “appear to lie mostly outside commodity markets” although not all rigorous applications of trade law, biosecurity protocols and technical trade rules can be interpreted as an escalation.

It notes that growth in exports to China follows its accession to the World Trade Organization and Australia’s free trade deal, but defends Australia’s increasing reliance on China, by arguing the phenomenon is “not unique to Australia” and China is expanding trade with “many other countries”.

The report finds that concentration of Australia’s export markets varies, and China’s share ranges from 10% of wheat exports to 79% of wool exports. Australia’s markets for fibre are “more concentrated in China than other exports” but sectors with recently applied tariffs, including wine and barley, are “much less concentrated”.

Wine is predicted to be the biggest loser, with a 28% price fall estimated for wine grapes. The report blames “measures implemented to combat Covid-19” for reduced demand for red wine imports in China, as well as anti-dumping security deposits imposed in late November.

In the third quarter of 2020, the volume of Australia’s wine exports fell by 29% and value by 20% compared with the same quarter in 2019, although paradoxically there was a small spike in exports to China as importers there moved to boost stocks ahead of fresh restrictions.

Australia has tried to counteract China’s trade pressure by campaigns encouraging Australian expats and allies to purchase Australian wine in solidarity.

The report notes the US and UK have strong demand for “lower-value, bulk ‘commercial’ wines (under $10 per litre)”, but Australia will suffer as “high-quality wine formerly expected to be exported to China will be sold into other markets at lower prices”.

Wheat is identified as the next possible candidate for trade restrictions from China, although the report argues Australia can redirect to other markets usually supplied by the US and the Black Sea region.

Wool is “exposed to breakdowns in trade with China” although this is partly offset by a “lack of alternative wool suppliers”.

After wine, barley has been the second-worst affected by China’s restrictions. Nevertheless the volume of exports is projected to increase by 64% year-on-year, to 7m tonnes in 2020–21 despite China’s tariffs, due to expansion in Saudi Arabia and other Middle Eastern countries, Japan and south-east Asia.

The report notes “uncertainty” over future cotton exports to China, citing “reports of orders to cease purchases of Australian cotton”.

From 2017 to 2019 an estimated average of 49% (by volume) of Australian cotton exports went to China, representing an average of 24% of China’s cotton imports.

If exports were to cease, diverting cotton to other markets would probably result in a “price discount”, the report said. In 2020–21 the gross value of agricultural production is forecast to rise by 7% to $65bn, an upward revision from the September forecast.

Nevertheless, the overall value of exports is still forecast to fall by 7% year-on-year to $44.7bn because recovery from drought is limiting production and exports of livestock products and fibres.

No comments:

Post a Comment

BYD DM-i full tank 2400km mileage

What kind of technology is this? 2400KM is that possible? by BYD DM-i