Gaining access to Asian markets: an overview for producers

Increased investment in new farming technologies, advanced manufacturing, quality assurance and trade access solutions can enable Australia to meet new Asian demand and build on Australia's strong global reputation for food quality and safety.

Growth in global demand for food during the next few decades will be dominated primarily by Asia. According to Australia’s Bureau for Agricultural Research Economics, Asia will account for 71 percent of the total projected increase in demand, 43 percent of this from China alone. Due to its proximity, Australia is well positioned to compete in booming Chinese markets for high quality food if it can overcome significant economic, technical and cultural barriers to trade. 

Chinese consumers are primarily concerned about food safety and seek products of guaranteed provenance, produced and packaged in Western countries that have high regulatory standards.  While such products can achieve attractive prices in China, establishing and maintaining profitable export pipelines involves significant cost and risk. 

The China Australia Free trade agreement announced in November 2014 demonstrates a commitment by both governments to accelerate trade development. 

The agreement focusses on the removal or reduction of tariff and non-tariff barriers with the aim of reducing transactional costs; the reduction or removal of regulatory barriers which restrict services in order to support improved trade flows across goods and services; and the implementation of measures to encourage more foreign investment between Australia and China. 

Prospective products

Currently, almost two thirds of Australian food production is exported with food, fisheries and agricultural exports projected to increase two percent per annum up to the year 2050.  Australia’s main agricultural exports include wheat, beef, cotton and wool, which equates to approximately $14.7 billion in value per annum (Faostat). Australia produces in the order of 30,000,000 MT of wheat per year and is the fourth largest wheat producer.  Importantly, Australia is capable of producing substantial volumes of specialty wheat and other grains that command a price premium in Asia. Such 'mega niche' products offer higher returns than conventional commodities. Meat, diary products, organic food, wine and numerous other categories also have potential.   Austrade has undertaken market research in Asia across Australian food product categories, identifying significant demand for:

• Seafood (particularly saltwater shell fish such as oysters, live/frozen lobster, live/frozen abalone, crabs)
• Fresh fruits (eg. citrus, table grapes, cherries)
• Wheat and barley
• Chilled or frozen meat (limited to red meat as there is no protocol in place for white meat and game meat)
• Processed foods
• Wine
• Beer
• Natural fruit juice
• Convenience and ‘instant’ foods
• Confectionery and snack products
• Condiments.

Despite the potential, success is not guaranteed.  Australia faces competition from intra-Asian trade, other pacific nations and emerging economies of South America and Africa. Policy innovation is required across the fields of natural resource management, biosecurity, trade policy and eGovernment to modernise and streamline regulatory, industry development and trade access processes. Farmers must also become more active partners in the value chain, selling more directly where possible, taking more responsibility for consumer experience and embracing the innovation in farm practice and marketing made possible by digital technology.

Challenges

The increase of Australian business activity in China has resulted in higher numbers of commercial disputes in recent years. Exporters from Australia must deal with Chinese tax, accountancy and employment law alongside China’s transport infrastructure and commercial legal system. Austrade has produced a discussion paper on the business risks.  Distribution is another challenge: for example, supermarkets generally do not have centralised warehousing and distribution centres, making market penetration difficult without well-placed local partners. Negotiations may be time consuming as both parties come to terms with the other's price expections, terms of trade and requirements regarding counter party risk. The size of orders is is likely to be a further challenge with Chinese parties typically seeking quantities far larger than can be readily made up without jeopardising existing and more certain contracts. 

Government information, assistance and grants

Austrade and State industry departments provide valuable information and assistance to Australian firms seeking to export produce.  As a start, visit the About Exporting web portal provided by Austrade. This is a mine of detailed information about all aspects of the process.  The International Readiness Indicator will provide a quick assesment of your current status and next steps. There is also a instructive set of case food export case studies.

Possibly a majority of farmers are unaware of the existance and value of the Export Market Development Grants offered by Austrade which can cover major expenses such promotion and overseas representation, marketing consultants and visits, and many other key costs association with establishing a trade pipe line.

Efficiency and sustainability

To supply new Asian markets and other emerging markets in developing nations without depleting existing global and domestic supply chains, Australia needs to produce much more with less. To achieve this, farmers and researchers are exploring advanced technology and practice across energy and water efficiency, soil conservation, chemical use, quality assurance, plant and animal biology and biosecurity.  A key challenge for innovators in all markets is meeting both environmental and profitability objectives, and contradictory consumer expections around price, appearance, taste, safety and nutritional values of food. 

Taking advantage of the huge opportunity in Asia depends on increasing the skills, capabilities and adaptability of the entire food industry and food industry workforce. It also may demand greater collaboration across the subsectors of agriculture and State jurisdictions to implement measures that enhance Australia's reputation for food quality and safet and streamline market access. 

More information

Austrade: About Exporting

Australia-China Joint Working Group Paper: Feeding the Future

Austrade: Doing Business in China

Austrade: Food and Beverage to China

ANZ insight: Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand

Department of Agriculture, Fisheries and Forestry: National Food Plan Green Paper