High value export markets push focus to provenance

Richard Heath

Australia’s agricultural performance has historically been underpinned by high volume exports of commodities such as wheat, wool and beef. However, high value markets for fresh produce are now a significant driver of growth and these markets require a dedicated approach to establishing and maintaining the provenance of ‘clean’ production.

This was one of the key messages from the Australian Bureau of Agricultural and Resource Economics and Sciences’ (ABARES) Outlook 2018 – an annual convention reporting on the economic performance of and forecasting trends for the agricultural sector – which the Australian Farm Institute (AFI) research team attended in March.

Although the 2017–18 forecast for agriculture’s gross value of production (GVP) of $59 billion is 5% lower than the record-breaking 2016–17 year, the overall mood at the conference was optimistic for continued growth. This was reflected in a forecast of $61 billion agricultural GVP in 2018–19 on the back of ‘assumed strengthening in world growth lifting household incomes, supporting food demand growth in regions important to Australia’s agricultural trade, such as emerging Asia.’ The following graph (Figure 1) shows the ABARES forecast for how growth in exports will be influenced by both price and volume, indicating that consumers in export markets will purchase higher value goods at higher quantities as their household incomes increase.

Figure 1: Growth in nominal value of farm exports, cumulative change in price and volume.

Note:  The volume and price indexes are calculated on a chain-weighted basis using Fisher’s ideal index. f ABARES forecast. z ABARES projection.

Source:  ABARES, Australian Bureau of Statistics.

This trend is already being observed in the extraordinary growth of Australian fresh produce exports. The value of Australia’s fruit and nut exports to its top five markets more than doubled in the six years to 2016‒17, with the value of vegetable exports up 50%. In 2016–17 the top five export destinations were countries in Asia, Europe and the Middle East, with China appearing in the top five for fruit, nuts and vegetables.

However, the rest of the world is not sitting idly by while Australia captures this high value demand for fresh produce. Indeed, the market opportunity is so large that Australia could not service it all even if it did have exclusive access. Competing export countries such as Chile, New Zealand, Peru, South Africa, the United States and China are moving quickly on the same opportunities. To stay ahead of the pack, it is important for Australian producers to understand exactly what consumers want.

Productivity improvements and a favourable policy environment are always important factors in maintaining a comparative advantage, but one significant factor in the growth of high value markets – particularly in Asia – is very important for Australian agriculture. It’s an overused term, but Asian consumers are undoubtedly seeking out clean, green food.

It is no longer adequate, however, to promote food as clean and green just because it comes from Australia. Evidence of provenance is increasingly important to savvy consumers, who want not only to feel secure about their choice but also to be able to tell a story about their food as a demonstration of affluence.

This focus on premium product provenance leads us to two areas of research that the AFI has a continuing interest in: digital agriculture and the ‘right to farm’.

The potential application of technology such as blockchain in agricultural value chains has matured very quickly to embrace supply chain integrity as much as payment improvements and financial transparency. Digital platforms connecting consumers with farmers can provide provenance information in a way that is trusted and immutable when applied this way.

The provenance story that consumers want to tell is increasingly shaped by those advocating for agricultural systems deemed to be ethically and environmentally sound. This will have appreciable implications for producers’ social licence and the types of practices that will be acceptable within that social contract.

The expansion of high-value export markets is proving increasingly important for Australian agriculture. Supporting this trend will have consequences for commodity mix, farming practice and technology and the subsequent potential to significantly alter the Australian agricultural landscape.

Image:  APAL