July 1, 2020

Insights into agricultural trade during COVID-19

The below was originally published on, and is intellectual property of, the Department of Agriculture, Water and Environment.

In the early stages of COVID-19, there were significant concerns for Australian agricultural trade and the impacts we may see. Over the past few months however, agricultural trade has thankfully held relatively steady.

Head of Agricultural Forecasting and Trade for ABARES, Dr Jared Greenville, noted that official trade data shows that between January and March 2020, most agricultural exports continued to leave Australia and reach consumers in international markets.

‘Where exports are down on long-term average figures, this is mostly due to the effect of the recent drought on domestic production levels.

‘But there were exceptions, and significant disruptions did occur, particularly for sectors closely linked with food services, and those reliant on air freight to get their produce out of the country,’ said Dr Greenville.

‘Seafood is a key example of this, and we saw exports in this space fall sharply in February 2020. This was due to the timing of the spreading pandemic with peak seafood export periods, and a more significant reliance on air freight (approximately 76% of seafood export value).

‘While there was some recovery in March, our seafood exports remain well down on long term average results.’

Domestic production relies on continued access to imported goods like chemicals, fertilisers, agricultural machinery and veterinary medicines.

‘The trade data shows that these goods have continued to arrive, despite the pandemic. Most of these products arrive by sea, which has been much less impacted than transport by air,’ said Dr Greenville.

The global economic outlook is a significant concern going forward, and the International Monetary Fund (IMF) is forecasting a 3% contraction in global economic activity in 2020—an outcome that is worse than we experienced during the global financial crisis in 2007/08 (IMF, 2020).

‘Because agricultural exports mostly relate to food, the impact will most likely be felt through softer prices, rather than significantly reduced consumption. This is what we saw during the global financial crisis, when agricultural trade remained steady despite the economic turmoil that followed.

‘Not all products from the sector are essential though. As economic activity declines and global incomes are reduced, products consumed through more discretionary spending are likely to be affected, such as high quality food for cafés and restaurants.

‘For products which feed exclusively into manufacturing supply chains such as cotton, wool and wood products, demand may be affected by manufacturing closures, disruption to construction, and the effect of falling incomes on the purchase of new clothes and other durable goods.’

Depending on the course of the pandemic, economic activity is expected to begin normalising in 2021.

For agriculture, the pandemic has highlighted the risk of concentrated supply chains for certain goods and services. A diversified supply chain, which includes domestic and multiple international options for imported inputs and export markets, allows for risk mitigation and continuity of supply in almost all situations.

Visit the COVID-19 Hub on our website for more detailed insights into the impacts of the pandemic on our industry.

See our article on how the Australian Government’s International Freight Assistance Mechanism is helping to get Aussie exports off the ground during COVID-19.

To read the full article please visit: Agricultural Trade Matters, July 2020

 

Please provide contact details