Saudi Arabia

Hungry Gulf States make good ag trade mates

Australian Horticultural Exporters Association chief executive officer, Dominic Jenkin, says earnings from the Persian Gulf are not as lucrative as China, but demand is strong and we should not fear market competition.

THEY may not have the booming reputation of some of our nearer Asian export markets, but old trade friends are proving to be good friends in the Middle East.

The energy-rich Persian Gulf, one of Australian agriculture’s notable long-term markets, is fast growing in size and value, particularly for meat and horticulture lines.

Even despite stiff competition from cheap Black Sea grain, the Gulf’s tradition of Australian cereal imports continues to hold ground.

While Asia is conveniently close for our exporters, rising affluence and consumer maturity in the United Arab Emirates (UAE), Saudi Arabia, Bahrain, Kuwait, Oman and Qatar cannot be ignored says business information research firm, IBISWorld.

About 70 per cent of the food eaten in the arid region is imported.

Among other things, the UAE and Saudi Arabia are star consumers of Australian carrots, taking about 44,000 tonnes in 2015-16 – a 19 per cent increase on 2014-15 – worth about $37 million.

Meating the market
Australian meat sales to Saudi Arabia and Qatar climbed 24pc and 29pc respectively in the past five years.

These two meat destinations alone are tipped to be worth almost $500m this financial year.

Australia’s total meat and livestock sales to the region are likely to be worth more than $1b after a 17pc rise since 2012, said IBISWorld senior industry analyst, Sam Johnson.

Liberalised trade laws in the UAE had helped it become a hub for re-exports to the region.

Last month the UAE and Australia confirmed easing in non-tariff barriers on chilled beef and lamb exports, extending the maximum allowable shelf life of these products from about 70 days to 120.

“Not only does chilled meat have a higher market value, particularly to the premium restaurant trade, an extended chilled shipment window will likely reduce transport costs,” Mr Johnson said.

Import trends varied between Gulf States, but exports were generally strong for our meat, horticultural goods, sugar, dairy products and grain for human consumption and stockfeed.

“Saudi Arabia buys a lot of feed grain for its big dairy farms and Qatar recently purchased 4000 heifers from Australia and the US to help build up its own dairy herd,” Mr Johnson said.

Not only does chilled meat have a higher market value, particularly to the premium restaurant trade, an extended chilled shipment window will likely reduce transport costs
- Sam Johnson, IBISWorld

Australian grain exports to Bahrain – mostly wheat – have jumped about 95pc since 2012 with sales forecast to be worth $65m this year.

Former AWB trader turned market consultant, Ron Storey, said while Asia now absorbed about 60pc of Australian grain exports, valuable relationships in the Gulf stretched back 30 to 50 years.

Grain strain
“Until 10 or 15 years ago the UAE mainly only bought Australian grain and Saudi Arabia was our biggest barley market, especially for feed grain,” he said.

“Now China takes record barley shipments from us and the Gulf trade is very price competitive, although we still sell quite a bit of barley there.”

Gulf food commodity markets are hotly contested by Australia, the Europeans, South Africa, the US and even China.

Mr Johnson said fortunately Australia’s lower exchange rate had helped our competitiveness of late.

The horticulture sector is also benefiting from good airline freight rates which have helped shift a rising mountain of produce.

Horticultural highs
“Air freight space into the region is generally in our favour and shipping costs are fairly competitive, too,” said Australian Horticultural Exporters Association chief executive officer, Dominic Jenkin.

“But there’s considerable price competition from the likes of South Africa and Europe.

“Returns from horticultural exports to the Middle East are not as lucrative as China, but demand is generally good and we shouldn’t be afraid of competition.”

Total fruit exports to the UAE – our sixth biggest fruit export market – jumped almost 53pc in 2015-16 with standouts including a 111pc increase in oranges to 9000t, mandarins up 137pc to 6200t, table grapes up 11pc to 7000t, and cherries up 140pc to 280t.

Apart from lots of carrots, Australian vegetable sales to Saudi Arabia include potatoes (2100t), onions (2400t) and celery (up 300pc last year to 241t).

“The Gulf States are a sophisticated market so we work hard to differentiate our products from the competition and promote their Australian origin status,” Mr Jenkin said.

The Qatar question
IBISWorld’s Mr Johnson said despite some notable sales gains, Australia still had a fairly modest market penetration in the emerging region and opportunities for more export growth.

In the near term, however, current political difficulties in the region, with Saudi Arabia and UAE suspending trade with Qatar, could limit expansion into Qatar.

The UAE is a key hub for re-exports to Qatar, the fourth biggest buyer of Australian produce sent to the region.

“Qatar is a high value market which has grown 28pc for Australia in five years, but it’s too hard to speculate what’s going to happen in the year ahead,” Mr Johnson said.​

Source: Author: Andrew Marshall

Image: Dominic Jenkin (CEO of AHEA)