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ABARES Insights - United States and Australian agriculture-a comparison
ABARES Insights
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Issue 3, 2019
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Overview The United States is a major producer and the largest exporter of agricultural commodities. Because of the size of its agriculture sector, changes in production, trade and policy can affect international markets. This has been demonstrated by the China-US trade dispute, which has caused a diversion in exports for Australia and other countries. This Insights report compares the Australian and US agricultural sectors, and briefly profiles US agricultural policy, to highlight Australia's exposure to shifts in the global market resulting from the trade war. Key Issues The United States is a major agricultural producer and is considered a price setter on world markets. Smaller agricultural producers and exporters, like Australia, do not wield the same influence. US farm production differs from Australia because of different underlying climatic, geographic, policy and consumer factors. The composition of US and Australian agricultural exports differ. This has mitigated the effects of the China-US trade war on Australian agricultural exports. The United States is the world's largest agricultural exporter but is less export-oriented than Australia. About 20% of US production is exported, compared with 70% of Australian production. Australia and the United States have both increased exports to Asia by around 50% over the 10 years to 2016. Australia and the United States share 6 of their top 10 markets-China, Japan, Korea, Hong Kong, Vietnam and Indonesia. Both countries have experienced a similar increase in their share of total exports to China. Competition between the United States and Australia is likely to increase over the medium term if the United States is able to negotiate improved access to Japan, the European Union and the United Kingdom. China is Australia's single largest destination for agricultural exports and was the United States' second largest market prior to the trade dispute. US agricultural exports to China have halved since China's imposition of import tariffs and are expected to decline further in 2019. In 2018-19 Australian agricultural exports to China increased sharply for nuts (driven by almonds), vegetables, beef, mutton, lamb and cotton. The trade dispute, is likely to have longer term implications that will outweigh the short-term benefits. * The effective exclusion of the United States' agricultural exports to China has increased competition in Australia's other export markets. * The increase in Australian exports to China further concentrates exports in a single market, which currently represents about one third of agricultural exports. This increases Australia's exposure to policy changes and shocks in China. * The dispute is also having an impact on regional and global growth. Australian producers are potentially vulnerable to a downturn in income growth in Asia, as consumers react by shifting away from Australia's high value agri-food products to cheaper alternatives. * US import tariffs on Chinese consumer goods, including clothing, have the potential to disrupt global supply chains in these markets and presents a significant risk for Australian fibre exports. Australian producers need to remain agile, responding to changes in market demands and competition if exports are to continue to grow. Building on existing trade agreements and exploring new possibilities are necessary to protect Australian exporters from the longer-term trend of increased competition and market disruption. Continued support for the multilateral framework of international trade is also important to curb direct support payments to agricultural producers, which further distort markets and can disrupt trading patterns.
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ABARES : Australian Bureau of Agricultural and Resource Economics and Sciences : Department of Agriculture
HOWDEN Matthew

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ISBN 978-1-74323-445-7

ISSN 2209-9123

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