(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, Sept 22 One of the themes
in Australia as the resource boom comes to an end is that the
country will be able to compensate by boosting its agricultural
sector, the so-called "mining to dining" manoeuvre.
An Internet search of the terms Australia and "mining to
dining" reveals almost 4,000 items, many focused on the view
that China, the top buyer of Australia's resources, will not
only continue to suck up the country's iron ore and coal, but
also all the farm goods it can produce.
This idea became all the more prevalent as the prices of
iron ore and coal, Australia's major exports, started to plunge
in 2011, shattering the unrealistic hopes of politicians and
voters of an endless commodity boom that would deliver a tax
The gloom was reinforced by the downgrading of expectations
of the next big hope, liquefied natural gas (LNG), where prices
dropped by more than 70 percent in the past 2 1/2 years just as
Australia was completing eight new export plants of the
Enter agricultural produce and China's seemingly endless
appetite for quality beef, dairy, wine and fish as Australia's
new positive narrative.
However, while Australian agricultural exports have shown
strong growth in recent years, they too appear to now be
experiencing the limits of China's appetite.
The Australian Bureau of Agricultural and Resource Economics
and Sciences (ABARES), a federal government forecaster, said it
expects the value of the country's farm exports to drop by 5.6
percent to A$44 billion ($33.6 billion) in the 2016-17 fiscal
year that started on July 1.
This is despite an expected 2.8 percent rise in the volume
of farm output, with ABARES saying price declines for exports of
wheat, dairy, barley and chickpeas will more than offset
expected price increases for wool, wine, lamb, sugar, cotton and
some other farm products.
The struggles of the dairy industry illustrate just how
difficult it is to engineer a sustainable lift in production.
Dairy processors ramped up output in recent years on the
back of rising Chinese imports of both fresh and powdered milk
products, encouraging farmers to increase output and the amount
of land devoted to dairy.
However, prices collapsed as China built up its own dairy
industry and placed stricter controls on imported products.
Nonetheless, Australian farm exports have performed
admirably in recent years, rising 6.8 percent from A$41.2
billion in the 2013-14 year to the estimate for the current
MINERALS AND ENERGY ON THE REBOUND?
But they still have some way to go to close in on iron ore,
which remains top dog despite the 80 percent plunge in spot
Asian prices .IO62-CNI=SI between February 2011 and the recent
low point reached in December last year.
Iron ore exports are forecast to earn A$48.85 billion in
2016-17, according to the government's June Resource and Energy
This is down from the record A$74.6 billion in 2013-14, but
the point to note is that there is an upside risk to the current
forecast, given iron ore's .IO62-CNI=SI 29 percent rally so
far this year.
However, Australia's farm exports are now more valuable than
its shipments of coal.
The government forecasts combined metallurgical and thermal
coal exports worth A$31.9 billion in 2016-17, down from A$40
billion in 2013-14.
This is a reflection of weaker coal prices, but, similar to
iron ore, these appear to have bottomed and are on track to
record the first year of gains in 2016 after five years of
The value of LNG exports is also expected to surge in
2016-17 as the new plants ramp up output, with the government
forecasting A$25.3 billion for the fiscal year, up 55 percent
from the A$16.3 billion in the 2013-14 year.
The value of all Australia's resource and energy exports is
expected to reach A$163.4 billion in 2016-17, up from the prior
year's A$158.2 billion, but down from A$194.9 billion in
This means resource and energy exports are still nearly four
times the value of farm exports.
The gap has narrowed in recent years, but mainly because
resource and energy prices have fallen sharply while farm
products have performed better.
The shoe now appears to be on the other foot, with rural
products struggling and mineral and energy commodities showing
signs of a sustainable recovery.
This will make it harder for Australia to continue to
promote the idea of a "mining to dining" boom, as the reality is
that no matter how well farm exports perform, they have a long
way to go before they can come close to matching minerals and
(Editing by Himani Sarkar)