Bearing fruit: Free trade agreements offer growers, wholesalers much needed boost
Australian fruit growers and wholesalers have faced difficult trading conditions over the past five years, as the dominance of Coles and Woolworths has reduced farmgate prices and put pressure on wholesalers. Alongside these issues, domestic demand for fruit has shrunk and revenue has diminished for primary industries such as apple, pear and stone fruit growing. However, an opportunity has appeared for growers and wholesalers to boost export revenue through the recently signed free trade agreements (FTAs) with Japan, Korea and China. These agreements will reduce tariffs on Australian horticultural produce overseas and encourage increased export volumes, lifting growth prospects for these industries.
体育平台The FTAs have varying implementation time frames, but all three include the removal of tariffs on fruit grown by Australian producers. The China-Australia Free Trade Agreement will reduce these tariffs from 10.0% to zero over the next four years and the Japan-Australia Economic Partnership Agreement will remove tariffs of up to 34.0% over the next 15 years. The Korea-Australia Free Trade Agreement has already eliminated a 24.0% tariff on cherries and is set to remove tariffs on other Australian fruit produce over the next three to 10 years. Combined, these agreements will have a positive effect for primary and secondary operators in the Australian agriculture sector that can make use of the upcoming export opportunities. This change will bring relief for operators that have struggled against the downward pricing pressure of wholesale bypass in recent years.
Apple, pear and stone fruit growers have been hit hard by the strong bargaining power of Australia’s supermarket giants, Coles and Woolworths. While some larger producers have benefited from direct supply contracts with retailers, many farmers have been put at a disadvantage during price negotiations for their produce. These factors, combined with declining domestic demand caused by cheap fruit imports and poor weather conditions over 2013 and 2014, led to revenue declines for the apple, pear and stone fruit growing industry in the four years prior to 2015-16. The FTAs are anticipated to help return the industry to growth in the next five years as exports increase. The high perceived quality of Australian fresh food produce in international markets will work to the industry’s benefit, helping to ease pricing pressures.
体育平台Fruit and vegetable wholesalers have also felt the pricing squeeze, although bypass trends have had less of an effect on this industry than many other wholesale sectors. Nevertheless, industry enterprise numbers have declined over the past five years, as the already slim profit margins of smaller operators have been further reduced. Fortunately, the FTAs with Japan, Korea and China should benefit the industry, as wholesalers often act as agents between Australian fruit and vegetable growers and buyers in international markets.
The Australian dollar is expected to continue depreciating over the next five years, further encouraging export growth for Australian agriculture industries. As domestic demand shrinks and the supermarket giants maintain downward pressure on farmgate prices, fruit growers and wholesalers must increasingly look to overseas markets to remain viable and increase their profit margins.