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New Rabobank report on Feeding East Asia

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article image Rabobank senior analyst Marc Soccio

A new report by agribusiness banking specialist Rabobank spotlights the growing importance of the East Asia region as the most significant market for many Australian and New Zealand food and fibre products.

Rabobank senior analyst Marc Soccio says in the report, ‘Feeding East Asia’ that the global and economic downturn has sharpened the focus onto the East Asian region as it continues to expand its slice of the global economic pie, offering opportunities no longer available in traditional markets as incomes grow and diets change in fundamental ways.

Mr Soccio points out that the significance of East Asia to Australian and New Zealand farmers and agribusinesses is growing from an already strong base, with markets in developing economies coming on-stream to supplement more established markets in the region.

He explains that rising incomes in developing countries across East Asia are gradually transforming household consumption patterns, giving rise to opportunities for greater trade with the region. Supply chains are also evolving, and competition to capture value from rising trade flows is arising from both within the region and beyond.

Given their greater understanding of this diverse region, Australian and New Zealand suppliers appear well positioned to satisfy growing demands for a greater range and value of food and fibre production in the coming years.

Australian and New Zealand food producers will also need to better understand the region in terms of its cultural and socio-economic diversity inherent in East Asia as well as its future direction as this will provide them with the competitive edge required to explore the right markets, in the right way, at the right time.

On the topic of the rising tide of foreign ownership in the sector, the Rabobank report refers to the case of Australia’s sugar sector, which undertook a significant shift in ownership of the industry’s downstream milling assets in the period from 2010 to 2011. Over the past decade, control of almost three-quarters of Australia’s downstream sugar refining assets has been acquired by foreign investors and around two-thirds are now owned by businesses based in East Asia.

Though the investment into the sector has had a revitalising effect, it has also significantly changed supply chain dynamics, with cane farmers now needing to be more mindful of how they transact with parties further downstream.

The value created by opportunities to supply food and fibre products to East Asia into the future will be influenced by a number of factors:

  • Competition from suppliers, both within the region and in other parts of the world will continue to test Australian and New Zealand food producers
  • Being significant agricultural producers, many countries in East Asia will try to meet their own needs as best as they can, limiting opportunities for some crops where Australian and NZ producers may not have a clear cost or quality advantage
  • Competitive forces also include the way in which value is shared in the supply chain, exchange rates and bilateral trade negotiations

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