Aussie ag watches nervously for further China fallout

Aussie ag watches nervously for further China fallout

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Australian barley producers are nervous about the fallout of the Chinese tariff announcement.

Australian barley producers are nervous about the fallout of the Chinese tariff announcement.

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Barley and meat have been the victims of Chinese bans and tariffs and other ag commodities are watching to see if there is more to come.

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THE Australian agriculture sector is watching this week's developments regarding China with serious apprehension.

The announcement regarding tariffs of up to 80 per cent on Australian barley was met with resignation, given the matter had been active since November 2018 and a finding had to be handed down by May 19.

However, the news earlier this week that four major meatworks have been banned from exporting to China due ostensibly to Chinese government concerns about packaging and labelling has raised concerns that Australia's stance on issues such as an investigation into the origin of COVID-19 may be hurting it on the trade front.

Australian agricultural has been one of the great beneficiaries of the rapid expansion of the Chinese economy over the past two decades, but the flip side to those gains is a strong reliance on the Asian powerhouse.

Cheryl Kalisch Gordon, Rabobank senior commodity analyst, says the last time Australia had this much reliance on one single trading partner was in the 1950s with the United Kingdom.

Cheryl Kalisch Gordon, Rabobank senior commodity analyst, says the last time Australia had this much reliance on one single trading partner was in the 1950s with the United Kingdom.

"You have to go back to the 1950s and the trade with the United Kingdom for when Australian agriculture had such a reliance on one single customer as we do now with China," said Rabobank senior grains and oilseed analyst Cheryl Kalisch-Gordon.

Andrew Weidemann, Grain Producers Australia, said the ag sector would continue to monitor issues with Chinese trade carefully.

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"With barley in the current environment China can do without it and there has already been mention of things like meat and wine, but we just have to see whether it stops there or there are further hurdles," Mr Weidemann said.

Victorian farmer David Drage said he was nervous of further trade restrictions following the announcement of the meatworks suspensions.

"The news with the meatworks is a worrying trend, with barley, whatever your thoughts on whether we dumped the product or not, you have to acknowledge China has the right to investigate the allegations," Mr Drage said.

"The meat thing has come a lot more out of the blue and without knowing too much about it you have to be worried about the potential for it being a bit of retaliatory action for what our politicians have been saying."

Andrew Whitelaw, Mecardo, says prospects for Australian barley were bearish before the Chinese news.

Andrew Whitelaw, Mecardo, says prospects for Australian barley were bearish before the Chinese news.

Andrew Whitelaw, Mecardo commodity analyst, said the outlook was bleak for many agricultural commodities over coming months, but he said this forecast was not necessarily based on formal Chinese sanctions.

"You look at something like barley, there's a massive drop in demand in China due to African Swine Fever killing 200 million pigs and there's the likelihood of cheap corn out of the US, where there is less competition from ethanol at present," Mr Whitelaw said.

Dr Kalisch Gordon added that China also needed to comply with the terms of its trade agreement with the US which meant it would look to buy more of its feed grain there which was also a negative for Australian growers.

Mr Whitelaw said the contraction in wool and wine prices was also forecast some time out, however he said the meat issue required more investigation.

"With the lack of pigs at face value you would expect demand for protein to remain high, but beef is very much an affluent person's product so changes there probably don't impact the majority of Chinese consumers as much as you'd first think."

Mr Drage said the current situation highlighted Australia's over-reliance on China.

"In future we need to be doing a little bit with a lot of countries rather than putting our whole focus into just one nation."

Dr Kalisch Gordon said this was a sound concept.

"It really is no different to a commercial business strategy - there is risk in having most of your eggs in one basket and the more buyer options you have the lower your risk."

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