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Insights April 2020

6 April 2020 |Horticulture
Workers in the field

Insights April 2020

6 April 2020 |Horticulture
The Coronavirus pandemic (COVID-19) is profoundly changing the domestic and international landscape.

This edition of the Rural Bank Insights Update aims to provide a
concise summary of Coronavirus’ impact on Australian agriculture as it stands today.

The report specifically addresses your questions around input supplies, underlying demand for food and fibre, and the impact on the supply chain across the commodity segments.

Overview

  • Products like almonds are more likely to be impacted by the implementation of a trade deal between China and the
    United States.
  • Availability of affordable air freight is presenting a significant challenge for the resumption of fruit trade in to export
    markets.
  • China accounted for 50 per cent of Australian nut exports, and 33 per cent of Australian fruit exports in 2019.
  • Domestic fruit and vegetable prices have been increasing, driven by the impact of drought, bushfires and
    coronavirus panic buying.

Key Markets

Nuts

  • Consumer buying behaviour due to Coronavirus has shifted towards more supermarket buying, this has lifted demand for non-perishable products including nuts. This is expected to lift demand for nuts from Australian in
    the short term, however supply chain disruptions are expected to impact export volumes in 2020.
  • Macadamia production for this season is forecast to be down in 2019.Export demand for Macadamia’s is heavily reliant on Asia’s middle class, hence reduced discretionary spending or pressure on disposable incomes as a result of Coronavirus will likely impact overall export demand. China accounts for 38 per cent of macadamia exports from Australia.
  • China accounted for 55 per cent of almond exports in 2019, driven by trade tensions with the U.S. Export volumes will come under pressure in 2020, due to a trade deal between the U.S. and China which could see
    Californian almonds grow market share in the Chinese market. Historically, India is Australia’s largest market for almonds, exports in 2020 will likely balance out between China and India. However, in addition to increased competition from the U.S., the supply chain for almonds to both China and India could be impacted by the prolonged impact of coronavirus.
  • Although coronavirus is expected to have an impact on export demand for almonds, signing of the phase one trade deal between the US and China is a larger threat to exports of Australian almonds. Such a deal could
    allow the US to re-enter the Chinese export market and compete with Australian almonds further decreasing demand.

Fruit

  • Air and sea freight disruption due to coronavirus continue to impact the perishable fresh fruit supply chain. It is still possible for fresh fruit to get into Asian markets however with a severe cut to passenger services, exporters are scrambling to find space on cargo planes. Space is at a premium, adding to the cost of exporting.
  • The positive news for Australian fruit exports is that inter province logistics have improved and are now operating normally, meaning once produce reaches China the in-market logistics are working effectively.
  • Grapes have had a small harvest which has provided a level of support, however decreasing demand globally and a high supply of wine is placing pressure on prices. Grape prices have remained relatively stable recently
    but could come under pressure as a result of usual harvest pressures and if more grapes (that are not assigned to contracts) are redirected to domestic market due to less Chinese demand.
  • Despite these issues demand remains high for fruit as consumers seek healthy foods.
  • Oranges are the next major fruit likely to be impacted by Coronavirus. The virus has boosted consumer awareness of the importance of vitamin C leading to increased demand from Chinese consumers. It is likely
    demand for oranges will remain high in the coming months however if air and sea freight disruptions persist prices could rise and curtail demand.
  • China accounts for 34 per cent of fresh orange exports and 36 per cent of mandarin exports. Japan is also a major market for citrus accounting for 15 per cent of orange exports. Demand is expected to remain high, driven
    by the perceived health benefits of vitamin C and also a smaller crop in Australia.

Vegetables

  • Domestic supply has come under pressure from panic buying and increased consumption of fresh vegetables driven by increased consumption of home cooked meals.
  • In addition to coronavirus panic buying, broccoli and cauliflower supplies were already down on last year due to drought and bushfires. As a result wholesale prices increased by as much as 71 per cent.
  • In export markets carrots to the UAE and Singapore are expected to come under pressure from supply chain disruptions.

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Sources: AusMarket

*Berry price index includes raspberries, strawberries, blackberries and blueberries.

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