A progress report of

Australia’s agricultural

trade with Asia

David Landers

General Manager

East Asia Growth Markets

AG in the Asian Century,

National Export and Innovation Conference

Toowoomba, QLD

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Austrade: an international agency with private

sector focus

• We have 80 offices in 48 countries, with 44 of those offices across Asia.

• 60% of our overseas staff are based in Asia.

• More than 400 of our staff have one or more Asian languages.

• Two-thirds of our overseas staff and senior executives have private sector experience.

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Our great strength is our sustained on-the-

ground presence in offshore markets

• We identify opportunities in market

• We can interpret the business climate and local

commercial practice, and provide language support as

well

• We can brief you in-depth on the market and the

companies involved

• We can refer you to potential customers in market

• We can develop a visit/contact program for you

• We can set up, and direct you to your appointments

• We can provide ongoing in market assistance to assist in

establishing your business presence

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Your first step is within an ‘arms reach of desire’

4

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Australia Week in India 2015

• Major mission led by Andrew Robb the Minister for Trade and Investment and supported by Austrade

• Aims to boost commercial ties in one of the world’s most important economies and follows the success of Australia Week in China (AWIC 2014)

• Includes a week long tailored program for major industries - food and agribusiness a key sector

• Held week commencing 12th January 2015

• To register, please go to www.austrade.gov.au from 2nd October

Australia’s

changing

sectoral

opportunities

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“As a country we are focused on backing our strengths,

the things we do as well as any and better than most”

Australian Minister for Trade and Investment, Andrew Robb | July | 2014

“Agriculture and agribusiness is one of our great

strengths”

Australian Minister for Trade and Investment, Andrew Robb | Opening Address to the

Australian Dairy Investment Forum | Melbourne | 2014

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Heading for a quarter-century with no recession

8

0.0

2.0

4.0

6.0

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014F 2016F 2018F

Australia: Annual GDP growth and outlook, 1992-2019F

% change over previous year

Source: IMF World Economic Outlook, April 2014

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Commodity prices have turned . . .

9

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. . . and resource sector investment is slowing

10

0

10

20

30

40

50

60

70

80LNG

Iron ore and coal

Other

Australia: Spending on major resources projects

A$ billions

Source: Budget 2014-15 papers

-15

-10

-5

0

5

10

15

20

25

Resources investment

Non-resources investment

Total business investment

Australia: Growth in business investment

Percentage points

Source: Budget 2014-15 papers

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Key question: how to position for continued

prosperity?

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Answer: ‘play to strength’

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Agribusiness is one of Australia’s ‘fantastic 5’ drivers

of future prosperity

Source: Deloitte, Positioning for prosperity

Asia: the

once in a

millennium

phenomenon

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Unprecedented middle class growth – in our region

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Asia dominates future growth in food demand

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Opportunity dwarfs our capacity…

0

50

100

150

200

250

300

350

2001 2003 2005 2007 2009 2011 2013

Other

Argentina

New Zealand

Malaysia

Canada

Thailand

Indonesia

Australia

China

Brazil

USA

Major Asian economies, food imports from the world

Exporters

US$bn

Source: ITC database 2013, major Asian economies include China, Japan, Korea, India, Hong Kong, Indonesia, Singapore, Malaysia, Taiwan,

Thailand, Vietnam, Philippines

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Implication -- focus on adding value, not just

volume to our food exports

• Annual increase of 75 million middle class consumers in Asia – almost double our annual exports

• Our aggregate market share in most product categories, in most markets is small and will continue to decline, even if we increase exports

• There are only a few countries in the world with the potential to be an enduring aspirational choice for food in Asia – Australia is one of them

• Billions of dollars of value to be unlocked if we get it right

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Successful strategies will address two powerful

trends

Food security The new Asian

consumer

The new Asian

consumer

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Australian agribusiness can best optimise returns from its finite

capacity by supplying differentiated food products to the slice of

consumers that are most demanding and willing to pay more for better

Source: IMA Asia, Asia Forecast Update June-July 2014.

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Safe food is prioritised above all else

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Successful exporters will cater to the aspirational

tastes and preferences of the new Asian consumer

Bindaree Beef

• Selling retail ready

beef to China

• Chinese language

premium packaging

• Cut of meat tailored

to local cooking

preferences

• Building on the

success of other

Australian firms for

market access

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E-commerce should be a key consideration for any

distribution strategy targeting the new Asian consumer

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Imported food is increasingly purchased online

• The new Asian

consumer is

increasingly turning to

the on-line channel.

• Online is growing in

popularity as a

trusted source of safe

and quality products

Source: JD.COM; CNNIC (China Internet Network Information Centre, 2007 & 2014), iResearch

Food

security

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Food security is an urgent and important concern to

many of our largest trading partners

• Food availability

• Food safety, quality and nutrition

• Containment of supply shocks and price volatility

• Building domestic production capability to reduce reliance on imports

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Asia is anxious about food security

Source: The Economist Intelligence Unit 2014

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Pressure is building for change

• Food safety arises from the tension between over investment on the front end and under investment on the back end

• China is witnessing unprecedented enforcement of food safety laws

• Rapid rationalization occurring across China’s dairy sector to create a few better regulated domestic players with scale and eliminate the weak

• The acquisition of ‘operating competence’ was a key driver behind Shuanghui International Holdings (China’s largest pork producer) USD$4.7B purchase of Smithfield Foods

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Asian anxiety over food security presents a timely

opportunity for Australia to position itself

strategically as a credible, long-term partner

• Historically Australia has responded to food security in a narrow way through bulk commodity export and value add processed food

• This is a partial solution to food security anxiety

• We can export much more than products without impacting demand for those products

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The missing piece – partnership in production

• Quality inputs into value-added

agricultural production

• Systems, services, Intellectual

property and technology that

improve production efficiency

and quality

• Education and skills

Turn our diversity and our comparatively small

scale into an advantage.

Industry

Prescriptions

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Natural advantages matched by Asian opportunity

do not guarantee success

• Build sticky relationships

• Team up

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Build ‘sticky’ relationships

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Deep commercial relationships secure repeat

business and are difficult to disrupt

Short-term supplier Long-term partner

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Dairy: China today, India tomorrow

• Contribute to Chinese and Indian domestic dairy capability

• Herd improvement through Genetics and genomics

• Improved productivity and quality through feeds, supplements, animal rearing

• Reinforce Australia’s reputation for production expertise and quality assurance systems

• Delivers differentiation for our dairy product exports

• Market access incentives

• From opportunistic sellers to long-term partners

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Oysters to Japan

• March 2011 Tsunami devastated Tohoku Oyster Industry

• Rehabilitated using Australian single shell variants

• Aligned Australian and Japanese industry systems and created demand for our services and technology

• Demand for Australian style oysters is building

• Opportunity for counter seasonal supply to Japan

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US wheat to the Philippines – the competition

• US Wheat provides trade and technical assistance to international buyers

• In-country consultants and seminars

• Hosts trade delegations and provides educational short courses

• Technical expertise focus areas of milling, storage, handling and baking

• Personalised consulting

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Beyond the supply of food Australia can build sticky

relationships by providing opportunities to invest in

Australian production

• Predictions that up to A$600 billion will

be needed by 2050 for Australia to

maintain its current share of global

output.

• To meet this demand alone, Australia

needs to attract investment that:

• boosts productivity,

• advances R&D

• improves the efficiency of

transport and processing

infrastructure,

• maximises the sustainable use of

our finite resources

Source: ANZ

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‘Team Up’

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Why team up?

• Our diversity has led to a fragmented domestic agricultural industry

• Coordination and cooperation can lend to scale…

• ..and secure a sustained advantage in international markets through a targeted and united positioning of Australian agribusiness at government, industry and firm levels

• If we do not act, we run the risk of the price premium we command being eroded over time

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15

20

25

30

35

15 25 35 45 55 65

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Australia enjoys a global reputation for provenance…

Importance

High Low

High

Au

str

alia

perf

orm

ance

I can trust it to be free

of contaminants or

harmful ingredients

The

processes

used to

produce it

make it safe

to eat

It is good value for money

It comes from

somewhere with a clean

or unpolluted

environment

It contains only natural ingredients

It is produced in an

environmentally responsible

way

It contains ingredients

from a country that

produces high quality

food

It contains only the

highest quality

ingredients

It comes from a

place, country or a

company that uses

research and

innovation to

improve quality

The

place/country it

comes from

produces food

that looks good

The

place/country it

comes from

produces food

that tastes

good

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…but we do not own that reputation exclusively…

…opportunity exists to consolidate on our positive

food image but we need to ‘team up’ to do it

Thank You