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Business Envoy

ABARES analysis: how COVID-19 has affected Australian agriculture

Article by Stephanie Black, ABARES Senior Economist

Initially the trade impacts of the COVID-19 outbreak on Australia's agriculture, forestry and fisheries sectors were limited to slowing demand in China. The subsequent global spread of the virus has affected global markets, extending the scope of possible impacts on Australian sectors.

The International Monetary Fund (IMF) is currently forecasting a 4.9 per cent contraction in global economic activity in 2020—worse than the Global Financial Crisis (IMF 2020).

The downturn in economic activity is unlikely to have a significant impact on demand for essential food products. This persistence of demand was seen during the Global Financial Crisis in 2007–08, when agricultural trade remained steady despite the economic turmoil the crisis created.

However, not all products from the agriculture, forestry and fisheries sectors are considered essential items.

As economic activity declines and global incomes are reduced, products consumed through more discretionary spending will be more significantly affected. These include high quality foods for cafés and restaurants. These effects were seen for seafood where the outbreak in China has been estimated to have led to a fall in export earnings in Australia of around $200 million in 2019–20.

There are four key points of risk that have been identified in Australia's export supply chain during the COVID-19 pandemic: logistics and freight, international processors, access to labour and government service delivery. Currently all four elements are either not considered to be impeding Australia's trade position or have been the focus of direct government and industry responses to ease constraints.

These findings are supported by trade data that indicate that despite the pandemic, most agricultural exports and imported inputs have continued as expected. With seafood as the main exception, export levels have been on par with what would have otherwise been expected during early 2020. Where results are down on five-year average levels, it is generally attributable to reasons other than COVID-19, such as the effect of drought on domestic production.

Declining live animal exports is also a watch point as the pandemic continues to evolve and demand from Vietnam and Indonesia softens.

The prospects for recovery for Australian agricultural trade are good. However, adaptation to changes in the future trade landscape driven by the COVID-19 pandemic will be important including: shifts in consumer buying towards more online sales, higher demand for stable and safe food, a greater awareness of supply chain risks, increased use of digital trade systems and the risk of creeping protectionism.

Key areas for logistics and supply chain surety

Logistics and Freight

The ability to get product out of the country is a strong determinant of Australia's ability to trade. Air freight has been most heavily affected with the grounding of international passenger flights.

Key sectors identified at risk:

  • Meat
  • Seafood
  • Dairy

Government responses and sectoral observations:

  • International Freight Assistance Measure - a new network of 15 air freight service providers and freight forwarders accelerating delivery of agricultural and fisheries exports into key markets.
  • Recent figures indicate a return to average monthly container arrival levels. Previous reports of limited refrigerated container availability are being resolved as Chinese production increases.

Access to labour

A number of sectors rely heavily on migrant workers for harvesting produce. Travel restrictions, both domestically and internationally, may affect the capacity of these industries to produce and harvest product.

Additional challenges have been observed with qualified and skilled labour unwilling to travel and accompany live export ships.

Key sectors identified at risk:

  • Intensive horticultural industries (particularly upcoming winter horticultural products)
  • Live exports

Government responses and sectoral observations:

  • Visa extensions and permission for agricultural workers to stay with one employer for a longer period.
  • Permission for agricultural workers to travel between regions.
  • Cooperation with live exporters to ensure availability of Australian Government Accredited Veterinarians (AAVs).
  • Industry responses observed include local town accommodation being provided for contractors to self-isolate before beginning work, sanitising stations and temperature checks.

International processors

Most food processors internationally are likely to continue to operate as essential activities but labour availability in overseas markets may slow demand for Australian exports.

Textile processors in particular have been observed to have closed through the pandemic progression.

Key sectors identified at risk:

  • Cotton
  • Wool

Government responses and sectoral observations:

  • Wool and cotton are durable products that can be stored.
  • It is anticipated that demand will recover quickly once economic activity recovers in affected countries.
  • Key examples of how the wool sector is adapting to low prices and labour shortages include, for example, extending time between shearings.

Government service delivery

Continuing government services that facilitate trade, such as certification, accreditation and other regulatory services by Australian governments and our trading partners is important to ensure exports and imports still flow.

This includes registration and approval services which often require on-site audits by trading partners before exports are allowed to proceed.

Key sectors identified at risk:

  • All exports sectors subject to sanitary and phytosanitary certification by export partners

Government responses and sectoral observations:

  • engaging with trading partners to provide assurance of Australia's systems in order for trade to be maintained.
  • investigating and promoting advances away from paper-based certifications for food and agricultural goods including promoting eCert trial opportunities and capitalising on successful eCert trials to fully paperless systems.

Source: ABARES

For a more detailed look at ABARES research on the impacts of COVID-19 on Australian agriculture see:

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