Victoria—A mixed bag for food and fibre exports
World Risk Developments June 2019
Victoria is Australia’s largest food and fibre exporter, providing 27% of Australia’s food and fibre exports and accounting for 50% of Victoria’s total export base. Supported by a lower Australian dollar, the sector experienced moderate growth of 3% to A$14b in 2018. Growth was largely underpinned by meat and wool exports, while dairy and wheat disappointed following a strong run in 2017 (Chart).
Meat exports were a key contributor to growth, driven by a 42% rise in beef and 19% increase in other meat products. Rising incomes and increased demand for quality meat led to strong growth from China (↑44% in 2018), Japan (↑42%), South Korea (↑50%) and Malaysia (↑43%). Wool exports also rose by 7% in 2018, due to higher wool prices and stronger demand for fine and superfine wool from markets such as China, the US and the European Union. The prolonged drought conditions in Victoria, however, remain a risk factor for future meat and wool exports. Unless weather conditions become more favourable, the Australian Bureau of Agricultural and Resource Economics predicts that sheep and cattle livestock numbers will fall. This may weigh on beef and wool exports in 2019.
Wheat and dairy exports fell in 2018, with unusually dry conditions affecting supply. Wheat exports contracted by around 50%, as lower crop production and increased local demand meant that the exportable supply was limited. Milk, cream and yoghurt exports also declined by 2%. The exception was cheese and curd which grew by 8%, reflecting a growing preference for higher value dairy products in Asia.