Issue link: https://viewer.e-digitaleditions.com/i/103334
agribusiness Land of grapes & wine Should Australian agriculture be optimistic for the future? Baldeep S. Gill looks at our wine exports as a microcosm of the broader opportunities. As we start another year, Australian agriculture has the opportunity to look forward with either optimism or circumspection. This will vary according to geography, industry and individual producers and will often be influenced by short-term issues and challenges. However, we should always remember the bigger picture and longer term trends. Our closest regional neighbours are increasing in number, income and preference for food. Market growth The Asia-Pacific region, the Middle East and Africa will see population growth of nearly one billion people over the next 50 years. The emerging middle classes in these areas will experience a clear shift towards a diet that includes meat, grains and dairy. Across the region, the top five per cent of the population by socio-economic criteria will embrace discretionary purchases in consumer goods, including food and beverages. Let's look at one industry – Australian wine exports – as a microcosm of the broader opportunities. Wine exports to the world A United States Department of Agriculture report in 2012 indicated that Australia's global wine exports fell from 760 million litres in 2006 to 720 million litres in 2011 – a reduction of five per cent. Most notable were the reductions in exports during this period to the United States, the United Kingdom, Canada, New Zealand and Germany. By contrast, exports over the same period to China, Hong Kong, Taiwan and the United Arab Emirates showed strong growth. United Arab Emirates In 2006, exports to the United Arab Emirates totalled 2.4 million litres for a value of US$7.3 million. By 2011, this had grown to 3.4 million litres for a value of US$15.5 million. The 40 per cent increase in volume was accompanied by a 200 per cent increase in value of sales. China In 2006, exports to China totalled 22 million litres for a value of US$28 million. By 2011, this had grown to 40 million litres for a value of US$202 million. The 80 per cent increase in volume was accompanied by a 700 per cent increase in value of sales due to a substantial shift towards higher priced wine. China has gone from our 12th largest export market in 2006 to our fourth largest in 2011 and this is likely to increase. But wait, there's more The success of China is something to be proud of, but we should not become complacent. Over the same period, exports of bottled wine from France to China substantially outpaced the growth in Australian exports. When we consider the broader Asia-Pacific and Middle East regions, we need to rethink what we consider as aspirational growth. Conclusion Over the next few decades, a unique growth opportunity will present itself to Australian agriculture with the unlocking of massive consumer demand. Any contemplation of the future must take this into account. United Kingdom In 2006, exports to the United Kingdom totalled 260 million litres for a value of US$705 million. By 2011, this had fallen to 250 million litres for a value of US$424 million. The four per cent reduction in volume was accompanied by a 60 per cent reduction in value of sales due to a substantial shift towards lower priced wine. 100 Baldeep S. Gill is an independent financial consultant with 21 years of experience in financial services throughout Australia and the Asia-Pacific region. Email: baldeep.gill@theapcg.com