Growth in Australian Agricultural Sector-Free-Samples for Students

Question: Discuss about the Growth in australian agricultural sector for export market. Answer: Introduction The agricultural sector is one of the key economic sectors for Australia from the point of view of International exports. Agriculture and the farm sector accounted for over 6% of the total exports of Australia . Agri-Exports from Australia must cope up with a dynamic economic and political world in order to maintain market share. This report is a snapshot of growth in agricultural exports from Australia. Agricultural Exports of Australia and their Growth Table 1 The Top- Five Agri-commodities Exported from Australia Commodity 2014-15 (in million A$) 2015-16 (in million A$) 2016-17 (in million A$) % share % Growth between 2012 and 2016 Beef 9,040 8,495 7,115 1.9 12.1 Wheat 5,528 5,096 6,073 1.6 -3.3 Meat (excl beef) 3,840 3,649 3,831 1.0 11.1 Vegetables. 1,236 1,936 3,271 0.9 22.5 Wool and other animal hair 2,782 2,872 3,263 0.9 4.5 (Department of Foreign Affairs and Trade, 2018) There are five agricultural commodities which are consistently in the twenty five most exported goods and services from Australia. These figures help understand the dominance of the agricultural sector in Australias exports. On a combined level, these commodities were responsible for over 6% share of the total exports from Australia by AUD. This analysis does not include wine because the exports of wine are not included separately in statistical tables but included under the alcoholic beverages. Nevertheless, Wine produced in Australia is exported globally and is a source of foreign trade. (Winemakers' Federation of Australia, 2014) Australia is also, a major exporter of horticultural products like fruits and nuts. (Aebischer, 2018) As seen above, agricultural exports are not only among the biggest commodity exports of Australia but are also growing rapidly. In general, Agri- export have outperformed other commodity exports from Australia.(Department of Foreign Affairs and Trade, 2018) Factors Affecting the Growth of Exports A significant factor that affects growth of exports of the agricultural sector is the rate of exchange of the Australian Dollar. The Real Effective Exchange Rate is a good way to measure export growth. Graph 2: REER Comparison for Australia and USA . Source (The World Bank, 2018) REERis the nominal effective exchange rate (a measure of the value of a currency against a weighted average of several foreign currencies) divided by a price deflator or index of costs.(International Monetary Fund, 2018) Exchange rates reflect the countrys terms of trade. A better exchange rate leads to better relative prices. Growth in REER implies that exports became more expensive while it became cheaper to import goods. This is an indicator of the loss in trade competitiveness(International Monetary Fund, 2018) The increase in agri-exports have corresponded with the falling value of the Australian Dollar. In order to keep the competitiveness of agri-exports high, it is important to keep the value of the AUD in check. Trade Agreements and Partnerships Australias agricultural exports were pre-dominantly oriented towards the European markets in the past. However, this situation has been changing since mid-1990s. This has been due a number of reasons. One of these reasons being the rise of Asian economies like China and India as economic forces. (Department of Agricuture and Water Resources, 2017) Part of the reason for the decline in the share of Australian exports to the EU has been caused by excessive EU regulation and regulations that usually support agriculture from EU. Agricultural importa to EU are subject to several restrictive quotas, in-quota and out-of-quota tariffs . This could change with the ratification of the Transatlantic Trade Partnership Agreement (TPP). The TPP is a multi country free trade agreement which will allow Australia to export to several countries with low or no tariffs. (Department of Industry, Innovation and Science, 2017) Australia has bi-lateral trade agreements with USA and other countries. Trade agreements can be double edged swords as they not only allow exports without tariffs but also allow imports without tariffs. For example, wine is a significant agri-export of Australia. A free trade agreement with USA allows Australia to export wine to USA but also, allows for cheap wine from USA to be imported to Australia.(Department of Foreign Affairs and Trade, 2017) International Trade Environment The international trade environment is currently volatile and moving towards protectionism. This may have both positive and negative effects on Australias agricultural exports. For example, if the USA goes ahead with protective tariffs on Chinese imports and China retaliates with the same, then there is a possibility of increasing exports from Australia to China. China is a major trading partner of Australia and an importer of commodities such as beef, wine etc.(Department of Agriculture and Water Reources ABRES, 2017) Climate Change Climate chain can negatively affect the agricultural supply chain. Hence climate Change is a credible threat to Australian agri-exports. (Batt, 2015) Climate change presents, not only a direct threat to crops but also indirect threats. For example, water resources are affected due to climate change which consequently increases the costs of irrigation which is turn, increases production costs.(Aebischer, 2018) Conclusion According to Department of Agricuture and Water Resources, (2017) earning from the agricultural sector are expected to be approximately AUD 48.5 billion in 20182019. It is expected that fruit and nut exports will also remain strong. Exports of the traditional commodities such as wool, beef etc. are expected to grow and remain unchanged. However, these analyses do not take into consideration the impacts of the dynamic political changes that are currently shaping up. It is clear, that the growth of agri-exports is shaped up by not the just the agricultural factors but also non-agricultural factors such as climate changes, free trade treaties and more. Growth of agricultural exports in the future is expected to take place from South East Asian countries instead of traditional partners like USA and European Union. Bibliography Aebischer, C. (2018, March 6). Strong export growth for Australian produce. Retrieved from Asia Fruit: https://www.fruitnet.com/asiafruit/article/174918/strong-export-growth-for-australian-produce Batt, P. J. (2015, April 27). Australias five strong pillar economy: agriculture. Retrieved from The Conversation: https://theconversation.com/australias-five-strong-pillar-economy-agriculture-40388 Department of Agriculture and Water Reources ABRES. (2017). A stocktake of selected agricultural markets of the European Union - Opportunities for Australia. Canberra: Department of Agriculture and Water Reources, Australia Government. Retrieved from Department of Agriculture and Water Reources, Australia Government. Department of Agricuture and Water Resources. (2017, April 05). Agricultural Commodities Report. Retrieved from Department of Agricuture and Water Resources, Australian Governmet: https://www.agriculture.gov.au/abares/research-topics/agricultural-commodities/report#commodity-export-forecasts Department of Foreign Affairs and Trade. (2017, December 7). Australia-United States FTA. Retrieved from Department of Foreign Affairs and Trade, Australia Government: https://dfat.gov.au/trade/agreements/in-force/ausfta/Pages/australia-united-states-fta.aspx Department of Foreign Affairs and Trade. (2018, March). Australia's trade in goods and services 2016-17 . Retrieved from Department of Foreign Affairs and Trade: https://dfat.gov.au/trade/resources/trade-statistics/trade-in-goods-and-services/Pages/australias-trade-in-goods-and-services-2016-17.aspx Department of Industry, Innovation and Science. (2017, December 7). Free Trade Agreements. Retrieved from Business, australian Givernmet: https://www.business.gov.au/info/run/free-trade-agreements International Monetary Fund. (2018). REER is the nominal effective exchange rate (a measure of the value of a currency against a weighted average of several foreign currencies) divided by a price deflator or index of costs. Retrieved April 19, 2018, from International Monetary Fund: https://datahelp.imf.org/knowledgebase/articles/537472-what-is-real-effective-exchange-rate-reer Tarditi, A. (1996). MODELLING THE AUSTRALIAN EXCHANGE RATE, LONG BOND YIELD AND INFLATIONARY EXPECTATIONS. Australia: Reserve Bank of Australia. The World Bank. (2018). Databank. Retrieved September 6, 2017, from The World Bank: https://data.worldbank.org/topic Winemakers' Federation of Australia. (2014). Australian Wine. Coles; Winemakers' Federation of Australia.