Australia’s agriculture buffeted by falling demand due to pandemic

For the first time in many years, Australia’s agriculture sector is experiencing price movements driven by falling demand in wake of the pandemic rather than output-led supply changes such as droughts or cyclones, according to a government report.

However, the downturn is economic activity is unlikely to have any significant impact on demand for essential food, a consumer behaviour that was seen even during the 2008 global financial crisis, says Australia’s Department of Agriculture, Water and the Environment.

World merchandise trade volume is expected to fall by between 13%-32% in 2020, which is bound to impact discretionary spending including high-quality foods sold in cafes and restaurants.

With over 70% of agricultural production exported and close to 50% of employment in the sector derived from trade, Australia is more reliant on trade than most other countries.

Falling demand has made it unviable to export red meat for retail in several markets because of the high cost of transportation and a sharp decline in prices, the report said.

“For Australian exporters to Indonesia, there has been a slowdown in live trade, but an Increase in meat exports,” the report said, noting that many Indonesian consumers moved away from beef from feed lots to packaged products sold in supermarkets.

The impact of the pandemic on other agricultural products like cotton and wool will depend on the duration of manufacturing shutdowns, though lower incomes also mean less demand for clothes and other durables.

Agricultural export levels, however, have been on par with what was expected earlier this year, though down from.5-year average levels because of the effect of drought and not so much covid.

However, seafood exports have been significantly impacted as the pandemic coincided with the peak export period of the produce.
Despite the pandemic, imports of in put like fertilisers, chemicals, machinery and equipment have not been impacted, it said.

China is Australia’s largest input supplier, followed by the US, Europe and New Zealand.

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