Australian Horticulture Annual Review2018

2

About the research

The Australian Horticulture Annual Review includes data and outlooks on production in Australia, seasonal conditions, prices and demand. Significant effort has been taken to secure the most recent data available.

About Ag Answers

Ag Answers is a specialist insights division of Rural Bank. Recognising that good information is the key to making good business decisions, Ag Answers provides research and analysis into commodities, farmland values, farm business performance and topical agricultural issues to enable farmers to make informed decisions.

About Rural Bank

Rural Bank has been a wholly-owned subsidiary of Bendigo and Adelaide Bank Limited since 2010. It is the only Australian-owned and operated dedicated agribusiness bank in the country, providing exceptional financial services, knowledge and leadership for Australian farmers to grow.

This report is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Rural Bank Limited, ABN 74 083 938 416 AFSL / Australian Credit Licence 238042 makes no representation as to or accepts any responsibility for the accuracy or completeness of information contained in this report. Any opinions, estimates and projections in this report do not necessarily reflect the opinions of Rural Bank and are subject to change without notice. Rural Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth therein, changes or subsequently becomes inaccurate. This report is provided for informational purposes only. The information contained in this report does not take into account your personal circumstances and should not be relied upon without consulting your legal, financial, tax or other appropriate professional.© Copyright Rural Bank Ltd ABN 74 083 938 416 and Bendigo and Adelaide Bank Ltd ABN 11 068 049 178 (RBL18874) (02/18)

32

Summary

Most of Australia’s horticulture industries recorded an increase in production in 2017. An early spring in Queensland and optimal growing conditions in Western Australia saw an overlap of growing seasons for spring harvested fruit and vegetables. This put prices under pressure for a number of fruit and vegetable categories. Despite these exceptional seasonal conditions, most fruit and vegetables prices are expected to increase in 2018.

Growing demand from India for Australian almonds looks set to continue in 2018. Price appears stable and demand could increase with India seemingly happy not to utilise their stock pile to satisfy domestic consumption, instead relying on imports. Macadamia exports continue to grow as a result of demand from China and Vietnam. The export price per kilogram has almost doubled since 2012 and should continue positive growth in 2018.

Wine production increased again in 2016/17 with demand growing strongly as a result of the China-Australia Free Trade Agreement. China has the potential to surpass $1 billion in wine imports from Australia in 2018. Table grapes are also benefitting from growing Chinese demand with average export price per kilogram rising every year since 2012.

Horticulture Innovation Australia will focus research and development on growing exports of fruit and vegetables between now and 2021. Avocados, oranges, mandarins and bananas are fruits to watch in 2018 as demand grows along with supply. Vegetables such as broccoli, celery, lettuce, carrots and mushrooms all stand to benefit from growing export markets in 2018.

7%

The Australian Bureau of Statistics vegetable price index is expected

to increase by

in 2018

$1BAustralian wine exports to

China could reach

in 2018

10%The Australian Bureau of Statistics

fruit price index is expected to increase by up to

in 2018

78%Average avocado price increased

in 2017

46%The value of table grape

exports to China increased

in 2017

27%The value of almond

exports to India increased by

in 2017

4

Fruit - Outlook

The weighted average fruit price index for all capital cities in Australia is expecting moderate growth of between two and 10 per cent in 2018. Domestic fruit consumption is growing, combined with increasing export exposure which will likely lead to more demand for fruit in 2018, which could have a positive impact on price.

Fruit categories to watch in 2018 will be avocados, oranges, mandarins and bananas. Avocado production has increased significantly in the last decade. Plantings have gone from 2,640 hectares in 2011 to around 3,848 hectares in 2016. Production is expected to increase again in 2018 as the yield of younger trees increases. Popularity domestically has grown as a result of marketing and the café culture of Australians which is spreading across every age demographic. The average wholesale price for avocados at the Brisbane market increased by 78 per cent in 2017 compared to 2016. December 2017 prices were 17 per cent higher than December 2016. Horticulture Innovation Australia is funding a research and development program for avocados which is forecast to increase the value of the industry by as much as $212 million and could see 10 per cent of production being exported by 2021.

Navel oranges are increasingly being exported to China and Japan. China has now overtaken Japan as Australia’s largest market for oranges. Fresh orange exports to China increased 59 per cent in 2017 compared to 2016. Plantings are growing, but are constrained by the time it takes nurseries to grow new trees. This could be beneficial for preserving price especially if demand continues to grow. In November 2017, China recognised South Australia as being fruit fly free, which could benefit exports in 2018.

The outlook for mandarins in terms of price, demand and supply looks positive. Significant growth in exports to China (+187%) and Japan (+66%) in 2017 is boosting the industry. Unlike other fruit categories that tend to see growth in demand for export or from the domestic market, mandarins have both. Something to consider is how the growth of 2017 can be replicated in 2018, given the growth in the market is relatively new. The months to watch will be from July to September.

The banana industry has potential to benefit from solid domestic demand and an emerging export market to Japan. Bananas are one of the most popular fruits domestically with 96 per cent of households buying them regularly. Supply is growing so it would be beneficial for the industry to diversify markets where possible. Over the past 12 months, Japan imported 82 tonnes of fresh bananas, which is up from 18 tonnes in 2016. There was no real pattern to monthly exports aside from October – December being slightly higher on volume. If the banana industry can replicate the success of the mandarin industry in the Japanese market demand could grow quickly. Risks to consider in 2018 include cyclones early in the year and the spread of Panama TR4 which is present in north Queensland and does kill banana plants. Research into resistant banana varieties will be important to mitigate the risk of the Panama TR4 disease.

Horticulture Innovation Australia will invest over $10M on trade activities during 2018. It is a timely announcement from the industry body as production particularly in the fruit industry continues to grow. Commodities likely to benefit most from an export boost include avocados, cherries and strawberries.

Australian fruit price index and 2018 forecast

Mar

-13

201

1/1

2 =

10

0

0

50

60

70

80

90

100

110

120

130

Jul -

14

Nov

-15

Mar

-17

Nov

-13

Mar

-15

Jul -

16

Nov

-17

Sep

-14

Jan

-16

May

-17

Jan

-14

May

-15

Sep

-16

Jan

-18

Sep

-18

Jul -

18

Jul -

13

May

-13

Nov

-14

Mar

-16

Jul -

17

Mar

-14

Jul -

15

Nov

-16

Mar

-18

Nov

-18

Sep

-13

Jan

-15

May

-16

Sep

-17

May

-14

Sep

-15

Jan

-17

May

-18

Source: ABS

95% confidence level68% confidence level

54

Fruit - Production

Looking back on 2017, it was a year of mixed results for horticulture producers. Production in Queensland was reduced early in the year due to cyclone Debbie. The impact was not as severe as first thought aside from the long-term damage to some tree crops such as mangoes. Temperatures over winter were mild, with average to above average for the eastern states. Moisture was adequate resulting in the onset of an early spring particularly in New South Wales and Queensland. Production increased across many varieties during this period. Bananas, blueberries and strawberries all recorded increases in production.

Historically fruit production has increased at an average of three per cent each year since 2012/13. The latest figures from the Australian Bureau of Statistics (ABS), albeit current only to 2015/16 show that olive production increased 55 per cent, bananas 43 per cent, avocados 39 per cent, mandarins 24 per cent, cherries 22 per cent, oranges 19 per cent, mangoes 12 per cent, grapes eight per cent, strawberries seven per cent, peaches seven per cent, and apples five per cent. Nectarine and pineapple production declined one and two per cent respectively.

Avocado production has increased in the last decade particularly around Bundaberg (13,828 tonnes in 2016) and Atherton (8,216 tonnes in 2016) in Queensland. Queensland avocado plantings have risen from 2,640 hectares in 2011 to over 3,800 hectares in 2016. Production is expected to increase again in 2018 as the yield from younger trees increases. Average yield increased 22 per cent in 2016 to 8.35 tonnes per hectare.

Banana production increased significantly in 2016. Over 94 per cent of Australia’s bananas come from north Queensland, primarily Tully where production increased by 42 per cent in 2016 to 163,966

tonnes. Production also increased around Atherton (+107 per cent), Babinda (+62 per cent) and Innisfail (+26 per cent).

Australian orange production has increased 17 per cent since 2014. Demand for fresh navel oranges both domestically and for export has encouraged growers away from the juicing variety Valencia to Navel oranges. NSW produces over 50 per cent of Australia’s oranges with a mix of both major varieties. The area around Griffith produces around 57 per cent of the state’s oranges. Production in the Griffith area increased 24 per cent in 2016. Victoria and South Australia account for most of Australia’s exports at 44 per cent and 40 per cent of the national total respectively. Late in 2017, China declared South Australia fruit fly free, which could see exports increase and provide incentive for SA fruit growers to expand production.

Strawberry production has been boosted by way of increased planting and improved yield through genetic improvement. This growth has more than satisfied the domestic market and exports of fresh strawberries have recorded very strong growth in recent years. Exports have grown from 728 tonnes in 2010 to 4,197 tonnes in 2017. Western Australia accounts for 84 per cent of fresh strawberry exports from Australia.

The sustainability of the current level of strawberry production is an issue. Key metrics to keep an eye on in 2018 will be the growth in fresh exports and the stabilisation of domestic price as an indicator of whether or not consumption increases. Around 75 per cent of total expenditure on strawberries comes from one third of the population. Consumers purchase on average 3.62kg per year. Horticulture Innovation Australia is expected to invest in growing domestic consumption.

6

Fruit - Price

Domestic market prices varied across fruit categories in 2017. Some popular fruits recorded gains in average price while others that came under pressure from supply recorded decreases.

Avocado prices continued to rise in 2017 despite increased production. The average price for Hass avocados produced in Queensland and sold in Brisbane increased by 78 per cent from $3.06/kg in 2016 to $5.46/kg in 2017. Western Australian produced Hass avocados sold in Melbourne have also experienced an increase in price. During the 2016/17 peak season, the average price was $4.25/kg. The current 2017/18 season is up 26 per cent, averaging $5.37/kg.

Banana prices increased slightly during 2017, averaging $2.23/kg sold as a 13kg carton in the Melbourne market, an increase of 9.9 per cent. The price at February 2018 is $2.44/kg which is 15.6 per cent above the long-term average.

Navel oranges have eased this season compared to 2016. The price for a 15kg carton at the Sydney market during the 2016/17 season averaged $20.30 or $1.35/kg. The current 2017 season is averaging $19.09 or $1.27/kg which is a decrease of 5.9 per cent. Fresh navel orange export prices were 19 per cent higher in 2017. Average price per kilogram in 2016 was $1.36 and $1.61 in 2017. This increase was largely driven by demand from China between February and April, which pushed prices as high as $2.46/kg.

Queensland imperial mandarin prices increased 12 per cent in 2017. In the Sydney market, Queensland produced mandarins sold for an average of $1.35/kg in 2017 compared to $1.21/kg in 2016. Export price also increased by 12 per cent in 2017 compared to 2016. Average price per kilogram was $2.15 in 2017 up from $1.91 in 2016.

Queensland strawberry prices began the 2017 season 23.6 per cent higher than 2016 averaging $2.72/250g punnet. Early spring weather resulted in increased production and average price began to fall. In the second half of the 2017 season average price was only 3.5 per cent higher than 2016 at $0.89/250g. The minimum monthly price fell to $0.65/250g compared to $0.78/250g in 2016.

New South Wales blueberries dominate local markets in terms of supply. Average monthly price at the Sydney market got as high as $4.52/125g punnet in June 2017 which is the traditional peak in price due to seasonal low supply. The 2017 season produced lower prices compared to 2016, average price was down one per cent to $2.58/125g punnet. Increased local supply has put pressure on prices since September. Blueberries are imported into Australia to supplement demand with around 18 per cent of total supply imported in 2015/16.

Mango prices have decreased significantly this season which runs from December to February. Average price for Queensland mangoes sold in the Brisbane market are 20 per cent below the 2016/17 season average. The December 2017 average price of $14.63/8 kg carton is down 32.7 per cent compared to December 2016. A long growing season has produced an overlap of supply between Far North Queensland and the Burdekin region resulting in an oversupplied market since November. Northern Territory mango prices weren’t much better in the Brisbane or Sydney market. Price is more stable in the Melbourne market where NT produced mangoes are selling for an average of $21.39/8kg carton, down seven per cent compared to December 2017.

10%The ABS fruit price index is

forecast to increase by as much as

in 2018

Average avocado price increased

in 2017

19%Fresh navel orange export

prices increased

in 2017

78%

76

Fruit - Price table

CATEGORY LATEST ONE YEAR AGO 2 YEAR AVERAGE

80TH PERCENTILE

20TH PERCENTILE

VICTORIA

Apples 12kg ctn MLB 27.00 32.10 30.94 32.17 27.00

Grapes crimson 10kg ctn MLB 21.31 25.48 29.09 37.50 22.50

Grapes thompson 10kg ctn MLB 25.00 20.13 24.75 28.78 19.99

NEW SOUTH WALES

Apples 5kg tray SYD 20.00 27.60 22.04 22.00 20.00

Blueberries 125g pun SYD 1.55 1.89 2.65 3.41 1.84

Cherries 5kg ctn SYD 42.50 45.00 45.51 49.55 42.50

Oranges 15kg ctn SYD 20.00 18.00 14.39 18.82 10.57

SOUTH AUSTRALIA

Apples 12kg ctn ADL 31.95 35.70 34.51 34.62 31.45

Nectarines 5kg ctn ADL 28.10 24.75 26.58 28.10 22.50

Oranges 3kg bag ADL 3.65 3.00 3.08 3.65 2.43

QUEENSLAND

Avocado Hass 10kg ctn BRS 128.33 90.00 51.78 72.50 24.07

Bananas 13kg ctn MLB 30.08 27.52 29.29 31.57 25.53

Mandarins 9kg ctn SYD 11.73 9.96 13.37 17.25 10.36

Mangoes Calypso 8kg BRS 18.50 26 19.93 24.83 15.70

Mangoes Kensington 10kg BRS 18.76 18.66 17.51 20.26 14.59

Strawberries 250g pun BRS 2.07 1.14 2.06 2.66 1.23

TASMANIA

Apples 18kg ctn SYD 47.50 37.00 37.17 47.50 31.09

Raspberries 125g pun ADL 2.50 4.04 5.73 6.70 4.69

WESTERN AUSTRALIA

Avocado Hass 10kg ctn MLB 107.60 105.75 60.48 75.00 35.00

NORTHERN TERRITORY

Mangoes Kensington 10kg MLB 23.75 20.00 30.28 42.17 21.31

EXPORT PRICES $/KG

Fresh Cherries 13.26 15.61 17.83 21.60 13.33

Fresh Mandarins 2.43 6.72 2.63 2.64 1.69

Fresh Navel Oranges 1.19 1.10 1.47 1.50 1.19

Data: Ausmarket consultants ctn = carton, pun = punnet Categories are shown by state of origin and which market they were sold in, denoted by MLB, SYD, ADL and BRS.

8

Fruit - domestic demand

Domestic consumption of fresh fruit is up nine per cent since 2014 to 70.86 kg per capita. Significant consumption growth occurred in mandarins up 55 per cent, mangoes 20 per cent, apples 17 per cent, avocados 17 per cent, oranges 12 per cent, blueberries 10 per cent and bananas four per cent. Consumption of fresh strawberries declined by 8.8 per cent and table grapes consumption was unchanged.

Mandarin consumption in 2016 was 4.34 kg per capita up from 2.52 kg per capita in 2014. The fruit has been well marketed as a convenient snack and with a focus on healthy eating in schools and at home the mandarin has gained popularity. It’s estimated that 61 per cent of households are purchasing mandarins regularly.

Mango consumption increased from 1.86 kg per capita in 2014 to 2.24 kg per capita in 2016. Around 43 per cent of Australian households purchased mangos in 2016. This suggests domestic consumption has room to grow through continued investment in marketing.

Apple consumption increased from 7.79 kg per capita in 2014 to 9.12 kg per capita in 2016. Consumption remained unchanged between 2015 and 2016. Domestic consumption will need to keep growing to meet increasing apple production over the last three years. A positive for the industry is that around 90 per cent of Australian households purchased fresh apples, making it one of Australia’s most popular fruits.

Avocado consumption continues to grow assisted by increased marketing. Consumption in 2014 was 2.62 kg per capita and 3.14 kg per capita in 2016. Around 53 per cent of Australian households purchased avocados in 2016.

Methods of consumption are something that can aid avocado demand domestically. Prepared ready to eat tubes of avocado, dips and as a breakfast item at cafés all compliment fresh consumption.

Fresh orange consumption is also increasing. In 2014, consumption was 5.37 kg per capita, increasing to 6.02 kg per capita in 2016. Oranges are reasonably popular at the checkout, with 62 per cent of Australian households purchasing fresh oranges regularly in 2016.

Fresh blueberries face strong competition from alternatives such as frozen berries which are often cheaper. Fresh blueberry consumption has grown slightly from 0.30 kg per capita in 2014 to 0.33 kg per capita in 2016. Around 41 per cent of Australian households purchased blueberries in 2016.

Banana consumption was 15.73 kg per capita in 2014, increasing to 16.37 kg per capita in 2016. Bananas are a very popular item at the supermarket with 96 per cent of Australian households purchasing bananas in 2016. Bananas have been marketed well in the last few years particularly as ‘nature’s energy bar’, encouraging consumers to choose bananas over processed energy products.

55%Mandarin consumption

has increased

since 2014

Domestic consumption of fresh fruit has increased

since 2014

53%In 2016, approximately

of Australian households regularly purchased avocados

9%

Source: HIA Fruit Handbook

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Blu

eber

ries

Man

goes

Ban

anas

App

les

Str

awbe

rrie

s

Avo

cado

s

Man

darin

s

Tabl

e gr

apes

Ora

nges

Domestic fruit consumption trend since 2014

98

Australian fruit exports are estimated to reach $699 million for the 2017 calendar year, up 17 per cent compared to 2016. Major markets included China (+70 per cent), Japan (+20 per cent), New Zealand (+19 per cent) and Hong Kong (+11 per cent).

The value of exports to China surged in 2017. This was almost exclusively due to the value of citrus exports increasing by 90 per cent. The value of mandarin exports increased 187 per cent from $16.4M to $41.1M. The value of fresh orange exports increased 54 per cent from $55.8M to $89M. China will remain a key market for Australian citrus in 2018. The growth in the value of orange and mandarin exports to China was driven by increases in volume, which indicates depth in Chinese demand.

Exports to Japan have consistently grown in value over the last three years. In 2017, it was also citrus that led the way. The value of fresh mandarin exports increased 66 per cent from $4.8M to $8M and fresh orange exports increased 14 per cent from $46.9M to $53.5M. The quantity imported has tracked similarly, indicating that extra supply in 2017 was welcome and that full demand potential may not have been met. Australian bananas also entered the Japanese market in 2017. Exports totalled just $23,000 in 2016 but managed to grow to $130,000 in 2017. Further growth can be expected in 2018.

Citrus exports were largely responsible for the 11 per cent increase in the value of fruit exports to Hong Kong in 2017. Total citrus exports increased 30 per cent compared to 2016. The value of fresh mandarin exports were up 68 per cent to $13.4M and fresh orange exports were up 14 per cent to $29.6M. Grapefruit exports also contributed to the increase in value. Up from just $760 in 2016 to over $700,000 in 2017.

Fruit exports to New Zealand increased in 2017 due to an increase in citrus exports. Fresh pear exports also increased in 2017, up 32 per cent to $4.3M. Fresh orange exports increased 11 per cent to $3.8M and fresh mandarin exports increased 10 per cent to $7.8M. Lemon and lime exports to New Zealand also increased from a small base in 2017 going from $199,000 to $242,000.

The value of exports to Singapore was down in 2017, largely due to a decrease in strawberry exports. The value of strawberry exports to Singapore was down 42 per cent compared to 2016. The quantity exported reverted back to 2015 levels, meaning market share gained in 2016 wasn’t retained. This may have been due to lower export prices offered by Singapore making it less profitable. The average price was down by 21.6 per cent in 2017 compared to 2016. In 2016 average price per kg was $6.98, in 2017 it was $5.47.

Fruit - export demand

187%Mandarin exports to

China increased

in 2017

The value of fruit exports increased

in 2017

54%Orange exports to China increased

in 2017

17%

Source: GTIS

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

China

2015 2016 2017

Hong Kong Japan Singapore UAE

Australia’s top five fruit export markets by value

10

Vegetables - Outlook

Most vegetable categories are expected to return to long term average prices in 2018. During 2017, a number of factors such as warmer conditions, adequate rainfall and overlapping seasons led to a price fall across many categories. If 2018 is a more traditional season the vegetable price index should recover the declines of 2017. Positive outlooks will come primarily from vegetables with a stable local consumption level and a growing export market.

Broccoli is a vegetable that is enjoying growing domestic consumption, increasing prices and a growing export market. These are three reasons why broccoli production is likely to increase in 2018. The second half of the calendar year will be the time to look for signs of growth in demand from Singapore. If the monthly value of exports continues to rise it will indicate that demand is still growing in this important market.

The lettuce industry has achieved stable domestic consumption which could provide a platform to grow export markets. Price risk is diversified if both markets can work together. Average domestic price increased when comparing the 2017 selling season to 2016.

Celery production could be set to increase further, as exports to Malaysia and Singapore continue to grow. Domestic consumption is flat and price has been stable in 2017, so any incentive to grow production will come from the export market.

Last year was an exceptional year for carrot production. Seasons overlapped and ideal growing conditions in WA and in eastern states caused the usually stable domestic price to decline. The decline in price in 2017 indicates a domestic market which is mature and doesn’t have a lot of depth to support increased production. If 2018 returns to a more traditional season, price should return to the long term average. The carrot industry will look to build export markets for growth, particularly to the UAE.

The outlook for asparagus is good despite declining consumption domestically. Asparagus production is split 54 per cent for export and 46 per cent for domestic consumption. This reduces the industry’s reliance on any one sales channel. Domestic price declined in 2017 while exports increased. This is a reflection of where demand is

growing. Early reports suggest production was down in 2017 which is possibly why most key markets recorded a drop in value but an increase in price per kilogram. This suggests that there is room for production growth in 2018 which should result in a higher value for exports. The key market will be Japan.

The tomato industry is almost entirely reliant on domestic consumption. Domestic consumption is growing, something that has promoted production growth, however, in spring 2017, the market came under pressure from oversupply. This scenario could become more frequent as tomato production has grown significantly since 2012. This creates a risk for the future, the key will be what happens this spring, because either side of spring price generally returns to its long-term average.

The mushroom industry could improve in 2018 and beyond if declining domestic consumption can be improved. Australia is a net importer of mushrooms which indicates there is room in the market for local production increases. Another positive sign is a growing export market in Japan. There was some price growth on the domestic market in 2017 which could be a sign of increasing demand.

The potato industry has endured a challenging period. Domestic consumption continues to decline, despite the popularity of potatoes which is high at 88 per cent of Australian households regularly purchasing potatoes. This could indicate that Australians are still eating potatoes but there is now more variety on their plate which is resulting in less potato consumption per capita. Popularity is important, and if per capita consumption is to increase, potatoes need a new image. They are popular enough that people would eat more of them if they were reminded of their health benefits. A positive for the industry is that exports are growing in the South Korean and Hong Kong markets. These market offer significant potential particularly South Korea where export value grew 74 per cent in 2017.

Horticulture Innovation Australia has a significant goal of increasing the value of vegetable exports by 40 per cent by 2020. This is expected to come from a range of categories but the focus for 2018 will be more on getting farms export ready and increasing the efficiency of the supply chain.

Vegetable price index and 2018 forecast

Mar

-13

0

80

90

140

100

110

120

130

Mar

-15

Mar

-17

Mar

-14

Mar

-16

Mar

-18

Jun

-13

Jun

-15

Jun

-17

Jun

-14

Jun

-16

Jun

-18

Sep

-13

Sep

-15

Sep

-17

Sep

-14

Sep

-16

Sep

-18

Dec

-18

Dec

-13

Dec

-15

Dec

-17

Dec

-14

Dec

-16

Source: ABS

95% confidence level68% confidence level

1110

Vegetables - Production

Vegetable growing conditions in 2017 were characterised by a mild winter and adequate moisture resulting in the onset of an early spring particularly in New South Wales and Queensland. As a result, some vegetable categories became more readily available than normal. Supply was very strong for vegetables such as Asian greens, beans, beetroot, broccoli, carrots, leek, zucchini, sweet potato, lettuce and tomatoes, putting pressure on prices mid-way through the year.

Fresh capsicum production in Australia fell 16 per cent in 2015/16. The major growing areas around Bowen and Bundaberg have seen production decline over the last five years. Production in the Bowen region has averaged a seven per cent decline since 2011 and Bundaberg has averaged an 11 per cent decline for the same period. Due to the seasonal nature of capsicums there is a relatively short window of three months between January and March where production peaks. Increasing supply can be difficult due to a high cost of production and the potential for the market to become oversupplied. Growing capsicums indoors is supplementing off peak supply demands as is importing capsicums from New Zealand.

Victoria accounts for 67 per cent of Australia’s tomato production. Growth in production has averaged 36 per cent year on year since 2012. The region around Rushworth accounted for 46 per cent of Victoria’s tomato production in 2016, increasing 21 per cent compared to 2015. Production also increased in the Loddon region which grew 50 per cent in 2016.

Potato production has slowly declined over the last five years, averaging a decrease of 2.4 per cent per year (although this decline

seems to have plateaued). The top three producing states South Australia, Tasmania and Victoria have all recorded declines since 2012. However Victoria reported growth in production of 10 per cent in 2016 and South Australia grew by 1.8 per cent. The industry is more mature than most and demand has decreased since 2014 despite how much of a staple potatoes are with 88 per cent of households purchasing them in 2016.

Asparagus production is largely being driven by demand from Japan. Production has increased by 22 per cent since 2014. Koo Wee Rup in Victoria is a major growing region producing around 90 per cent of Australia’s 7,576 tonnes of asparagus. The 2017 season did start off slowly due to some colder than usual nights at the beginning of spring.

Carrot production has been increasing since 2014, averaging 11 per cent growth per year. Since 2014 South Australia production is up 114 per cent, Queensland 59 per cent and Victoria 46 per cent. Growth in export demand is driving the increase in demand. Domestic demand has declined slightly since 2014. The volume of carrots produced in 2017 was particularly large due to exceptional growing conditions in Western Australia and Queensland.

Broccoli production has increased 12 per cent since 2012. Almost half of Australia’s broccoli comes from Victoria where production has plateaued in recent years. The industry is growing in Queensland where production has increased by 54 per cent since 2012.

12

Vegetables - Price

Vegetable prices were lower in 2017 due to exceptional growing conditions. The weighted average price index for vegetables dipped sharply in the September quarter of 2017. Vegetable prices are expected to increase slightly by around 1.6 per cent during the March quarter of 2018, and then by around 5.6 per cent across the remaining quarters of 2018. This would result in vegetable prices returning to a level similar to that of the June 2017 quarter before the early spring weather increased supply.

Capsicum prices trended lower in 2017 due to increased supply. Queensland capsicums sold at the Brisbane market were 17.9 per cent lower in December 2017 compared to 2016. The peak production season is now underway and will run to the end of March. The average price during 2017 was $16.94/ 8kg carton -26 per cent compared to $22.90 in 2016.

Tomato prices were influenced by higher spring production after the price peaked in winter. The current price has come back to the two year average. Queensland tomatoes sold in the Brisbane market averaged $15.24/10kg carton during spring 2017, a decrease of 34 per cent compared to the same period in 2016. Victorian tomatoes came under similar pressure in spring dipping to $8.02/10kg carton.

Gourmet Kipfler potatoes grown in Tasmania and sold in the Sydney market averaged $35.34/10 kg bag in 2017, 2.5 per cent below the 2016 average. Washed white potatoes grown in South Australia and

sold in Sydney averaged $24.30/ 15kg carton, which is 30 per cent lower than the 2016 average largely due to fewer supply disruptions. Weather events in mid to late 2016 restricted supply in southern Australia as a result potato prices increased sharply early in 2017.

Victorian produced asparagus sold in the Melbourne market for an average of $36.75/ 7kg carton across the 2016/17 season. Part way through the 2017/18 season prices have eased by 11.8 per cent to $32.42/ 7kg carton. Export prices were higher in 2017 averaging $10.49/kg up 13.3 per cent compared to 2016.

Carrot prices came under pressure in 2017 with excellent growing conditions in Western Australia and in eastern states. West Australian grown carrots sold in the Melbourne market are generally consistent at around $19-21/ 15kg carton however price decreased at the beginning of spring to $14.75/ 15kg carton. The average price for a 15kg carton in 2016 was $21.19, the average price for 2017 was $17.86 a decline of -15.7 per cent. The export price for carrots averaged $0.79/kg in 2017 which is an increase of 5.2 per cent compared to 2016.

Average broccoli prices increased eight per cent in 2017 for broccoli produced in Victoria and sold in Melbourne. Prices averaged $17.64/8kg carton compared to $16.37 in 2016. Current price is 20.4 per cent higher than this time last year. Export prices remained flat at $2.95/kg.

26%Average capsicum price decreased

in 2017

The ABS vegetable price index is forecast to increase

in 2018

8%Average broccoli price increased

in 2017

7%

1312

Vegetables - Price table

CATEGORY LATEST ONE YEAR AGO 2 YEAR AVERAGE

80TH PERCENTILE

20TH PERCENTILE

VICTORIA

Asparagus 7kg ctn MLB 47.24 42.59 34.89 42.59 25.00

Broccoli 9kg ctn MLB 19.29 16.40 17.13 21.07 12.33

Cauliflower 25kg ctn MLB 27.48 21.00 23.39 27.43 16.28

Celery 15kg ctn SYD 13.33 13.30 16.19 18.10 13.00

Lettuce 12kg ctn MLB 14.24 11.85 18.28 26.54 11.85

Mushrooms kg MLB 5.88 6.48 6.69 7.67 5.20

Tomatoes 10kg ctn SYD 22.12 20.38 22.86 33.28 13.92

NEW SOUTH WALES

Mushrooms kg SYD 6.70 5.79 6.79 7.27 6.25

Pumpkin kg SYD 0.57 0.70 0.64 0.89 0.43

SOUTH AUSTRALIA

Carrots 15kg ctn ADL 23.00 41.38 21.71 22.00 21.30

Onions 20kg bag ADL 12.25 24.41 16.73 21.45 12.69

Potatoes 15kg ctn SYD 29.50 24.41 26.77 29.50 21.50

QUEENSLAND

Capsicum 8kg ctn BRS 19.83 21.91 19.34 23.63 12.93

Cauliflower 25kg ctn BRS 23.50 17.21 19.84 23.54 14.27

Pumpkin 20kg ctn BRS 25.90 20.70 25.80 28.52 20.90

Sweet potatoes 18kg ctn BRS 14.29 32.61 23.63 31.69 15.86

Tomatoes 10kg ctn BRS 25.29 28.35 25.24 28.58 19.82

TASMANIA

Onions 20kg bag MLD 13.90 14.00 12.66 14.00 11.00

Potatoes 10kg bag SYD 25.00 6.80 35.72 46.28 23.80

WESTERN AUSTRALIA

Carrots 15kg ctn MLB 16.93 20.60 19.20 22.00 16.94

Lettuce 12kg ctn ADL 17.00 16.00 18.66 24.44 14.35

EXPORT PRICES $/KG

Fresh Asparagus 8.48 8.75 9.74 11.92 6.71

Fresh Carrots 0.87 0.89 0.88 0.89 0.86

Fresh cauliflower and broccoli 3.51 3.09 2.97 3.40 2.61

Fresh Celery 1.61 1.42 1.61 1.71 1.52

Fresh Lettuce 7.58 6.85 6.37 7.17 5.63

Data: Ausmarket consultants ctn = carton, pun = punnet Categories are shown by state of origin and which market they were sold in, denoted by MLB, SYD, ADL and BRS.

14

Vegetables - domestic demand

Domestic fresh vegetable consumption has plateaued in the last three years. Consumption per capita in 2016 was 87kg, with 99 per cent of Australian households regularly purchasing vegetables.

Fresh domestic tomato consumption has increased six per cent since 2014. Per capita consumption was 10.25 kg in 2016 with 86 per cent of Australian households purchasing tomatoes.

Broccoli consumption has increased by 4.3 per cent since 2014. Per capita consumption was 2.6 kg in 2016 and 69 per cent of Australian households purchased fresh broccoli regularly. This would indicate there is room for growth in domestic consumption as 69 per cent isn’t as high as other staple vegetables. It would appear that broccoli has both a strong export market and a growing domestic market.

Sweet potato consumption has increased slightly since 2014 at 1.3 per cent growth. Per capita consumption was 2.3 kg in 2016. Around 65 per cent of Australian households purchased sweet potato in 2016, this number indicates there could be room for growth on the domestic market through specific marketing activities.

Capsicums are a seasonal vegetable in Australia with imports filling the off season demand. Domestic consumption has grown one per cent since 2014. Per capita consumption in 2016 was 2.88 kg. Around 66 per cent of Australian households purchased fresh capsicum regularly in 2016.

Fresh head lettuce consumption has grown one per cent since 2014. Per capita consumption was 5.19 kg in 2016 and 69 per cent of Australian households purchased head lettuce regularly.

Domestic fresh carrot consumption has declined by two per cent since 2014. Per capita consumption has slipped to 7.95 kg with 91 per cent of Australian households purchasing carrots regularly. Carrots are a popular vegetable in Australian shopping trolleys and demand is unlikely to waver too much. Growth in the carrot industry is being driven more by exports than domestic markets.

Fresh pumpkin consumption has decreased by three per cent since 2014. Per capita consumption was 4.58 kg in 2016 and just 60 per cent of Australian households purchased fresh pumpkin regularly. This figure is fairly low for a staple vegetable and indicates there could be room for growth through better marketing.

Domestic potato consumption has decreased by four per cent since 2014. Potatoes are one of the most consumed vegetables in Australia at 18.79 kg per capita in 2016. Around 88 per cent of Australian households regularly purchase potatoes. Potato consumption has been in decline for a number of years. Possible reasons for this decline is the carbohydrate dense perception of potatoes and the freedom of substitution consumers have when buying vegetables.

Fresh asparagus consumption has decreased by six per cent since 2014. Per capita consumption was 0.3 kg in 2016 with just 30 per cent of Australian households purchasing asparagus regularly. The asparagus market is more reliant on exports with 54 per cent of production being exported in 2016.

4%Potato consumption has decreased by

since 2014

Tomato consumption has increased by

since 2014

87Domestic per capita consumption

of fresh vegetables was

kilograms in 2016

6%

Source: HIA Vegetable handbook

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Car

rots

Bro

ccol

i

Pum

pkin

Sw

eet p

otat

o

Pot

atoe

s

Cap

sicu

m

Tom

atoe

s

Asp

arag

us

Lett

uce

Domestic vegetable trend since 2014

1514

The value of vegetable exports in 2017 increased by one per cent to $251.6M. This modest growth in value follows a 24 per cent increase in 2016 with exports growing $51M since 2015.

Singapore remains Australia’s largest market for fresh vegetable exports recording a value of $48.3M in 2017, an increase of 10 per cent. Australia primarily exports cauliflower and broccoli heads as well as carrots to Singapore. Cauliflower and broccoli head exports accounted for approximately 27 per cent of the value of vegetable exports to Singapore in 2017. Carrot exports increased five per cent in 2017 to $12.3M. The value of celery exports increased 58 per cent in 2017 and has more than doubled since 2015. Pumpkin exports increased 25 per cent after a decline in 2016. Asparagus exports eased eight per cent in 2017. While lettuce exports increased 48 per cent and have nearly doubled since 2015.

The United Arab Emirates is Australia’s largest market for fresh carrots. The value of carrot exports increased 12 per cent to $28.7M. The quantity of carrots exported to the UAE has almost doubled since 2012 at approximately 33,000 tonnes in 2017. The total value of vegetable exports to the UAE increased by 12 per cent in 2017.

The value of vegetable exports to Japan eased four per cent in 2017. Japan is the largest importer of Australian asparagus, exports totalled $21.6M in 2017, down seven per cent. Fresh asparagus exports have achieved 14 per cent growth since 2015. Japan is also a growing market for fresh mushroom exports, which were up 20 per cent in 2017 to $0.9M. Mushroom exports have almost doubled since 2015.

The value of fresh vegetable exports to Malaysia decreased by 12 per cent in 2017. This was largely due to a reduction in onion exports, down by 78 per cent compared to 2016. It appears that demand for onions in Malaysia has decreased significantly, something that could be price related due to India putting a minimum price per tonne on onion exports which resulted in an increase in the price of onions in Malaysia. Australian export prices for onions increased in 2017. Fresh carrots are the main export vegetable in the Malaysian market, value increased two per cent in 2017 to $12M.

In 2017 the value of vegetable exports to Hong Kong increased by 11 per cent to $15.8M. This follows a 59 per cent increase in 2016. The growth in 2017 came from cauliflower and broccoli heads up by 46 per cent to $1M, head lettuce exports up 25 per cent to $2.5M and potato exports up by four per cent to $2M. Other major vegetables which are established in the Hong Kong market are asparagus which has nearly doubled since 2015 and carrots which have grown 28 per cent since 2015.

An emerging market for fresh vegetables is South Korea. The value of this market has increased 64 per cent since 2015. Fresh potatoes are the major vegetable export along with asparagus. Potato exports are up 74 per cent since 2015 totalling $12M in 2017 and asparagus exports are up 44 per cent since 2015 totalling $0.8M.

Vegetables - export demand

27%Cauliflower and broccoli

exports to Singapore increased

in 2017

The value of vegetable exports increased by

in 2017

12%Carrot exports to the

UAE increased

in 2017

1%

Source: GTIS

$-

$10

$20

$30

$40

$60

$50

India

2015 2016 2017

China Vietnam Spain Japan

Australia’s top five vegetable export markets by value

16

Nuts

Australian nut production has increased significantly in the last three years. Since 2014 nut production has increased by 19 per cent. Almond production has increased 27 per cent since 2014 and macadamia production 19 per cent. Export value decreased two per cent in 2017 largely due to a drop in almond exports to Spain.

Domestic almond consumption has increased seven per cent since 2014. Macadamia consumption has been flat since 2014. The majority of demand for nuts comes from the export market. Almond exports increased significantly in 2015 as a result of drought and production decreases in California. Since 2015 exports have settled around $445M in 2017, three per cent below 2016. Macadamia exports have retained the growth achieved in 2015 when export value increased by 14 per cent. In 2017 the value of macadamia exports eased by two per cent to $272M.

India is Australia’s largest export market for almonds. Volume exported increased by 27 per cent in 2017. Demand from India has been strong with volume more than doubling since 2012. A positive for Australian producers in 2017 was an increase in unit price for both shelled and in shell almonds sold to India. The shelled almond price increased 14 per cent to $7.88/kg. The in-shell almond price increased 11 per cent to $6.13/kg. Australian almond exports are mostly in-shell but a lift in unit price for shelled almonds resulted in increased export value in 2017.

The outlook for almond exports to India is positive. India’s ending stocks of almonds peaked in 2014 at a record high of 29,800 tonnes and began reducing in 2015 dropping by 30 per cent. Ending stocks are holding at 20,000 tonne which is why we are seeing growth in exports as India uses imports to satisfy current demand. Imports are at a record high of 95,000 tonnes in 2017. Domestic consumption is also at a record high of 96,000 tonnes. Australia accounts for approximately 26 per cent of India’s almond imports which is a very large share of total Australian production. Based on these statistics we expect almond exports to India will again be higher in 2018. The price appears to have settled and should average around $6-7/kg for in shell almonds and $7-8/kg for shelled almonds.

It’s worth noting that Australia has spread its market risk across multiple markets for almonds. Although most in-shell almonds are exported to India, half of Australia’s production is exported as shelled almonds to six markets. The majority goes to Spain followed by Germany, U.S, Netherlands, India and the UAE.

Australia is the largest producer of macadamias in the world producing 35-40,000 tonnes per year. Production growth has averaged around eight per cent year-on-year since 2011.

Major production regions include Bundaberg (QLD), Ballina (NSW) and Lismore (NSW).

Macadamia exports are a reasonably new opportunity for Australia. Their popularity has grown quickly particularly in the two main markets, China and Vietnam. The volume exported to China in 2017 increased 47 per cent to 10,468 tonnes. Moreover, the unit price continues to increase year on year. In 2012, exports to China were $3.52/kg and in 2017 the price averaged $6.57/kg for in shell macadamias. The volume exported to Vietnam increased 18 per cent in 2017 to 7,427 tonnes. Vietnam had been importing very small quantities of shelled macadamias since 2012 but in the last two years they have imported a large volume of in shell macadamias. In 2015, in-shell exports to Vietnam were none existent, then in 2016 we exported 5,793 tonnes and followed up in 2017 with 6,183 tonnes. The unit price of macadamias exported to Vietnam has also grown in the last two years from $6.56/kg to $6.60/kg for in shell macadamias. Based on export growth we expect macadamias to perform well in 2018. Prices should continue to grow and average around $6.60-7/kg for in shell macadamias. Local price for in shell macadamias is around $5.50/kg up from an average of $3/kg in 2013. We expect that as demand grows so too will local prices.

27%The volume of almond exports

to India increased by

in 2017

Australian nut production has increased by

since 2014

47%The volume of macadamia

exports to China increased by

in 2017

19%

Source: GTIS

$-

$50

$100

$150

$200

$250

India

2015 2016 2017

China Vietnam Spain Japan

Australia’s top five nut export markets by value

1716

Nuts - Price table

CATEGORY LATEST ONE YEAR AGO 2 YEAR AVERAGE

80TH PERCENTILE

20TH PERCENTILE

EXPORT $/KG

Almonds - in shell 6.16 4.82 5.76 6.33 4.83

Almonds - shelled 7.40 7.33 7.53 8.33 6.99

Macadamia - in shell 7.05 10.15 9.25 9.96 6.55

Macadamia - shelled 23.74 24.41 19.65 22.72 16.37Source: GTIS

18

Wine and table grapes

Australian wine production increased five per cent for the 2016/17 year to 1.37 billion litres. The volume of grapes crushed was up eight per cent to 1.98 million tonnes. Overall, 2016/17 was a successful year for wine production and sales. Wine sales increased eight per cent to $5.6B. The split by volume in 2016/17 was 61 per cent export and 39 per cent domestic. In 2017 exports were up 13 per cent to $2.6B, with volume increasing eight per cent to 816M litres. Red wine dominated exports with 60 per cent of volume. Domestic consumption increased two per cent to 500M litres at a value of $3.3B up six per cent. The split between red and white wine domestically was 45 per cent white and 40 per cent red. With red becoming more popular in 2016/17 in comparison to other years. Domestically, red wine sales increased with Pinot up 22 per cent and Shiraz nine per cent.

Australian wine exports were strong in 2017 largely due to demand from China. Wine exports to China were up 51 per cent compared to 2016, totalling $709M. China accounts for 27 per cent of Australia’s wine exports by value. Red wine is in high demand in China with exports increasing 53 per cent in 2017 to $671M. White wine exports to China also increased in 2017 up 32 per cent to $22M.

Since 2015, wine exports to China have more than doubled. The China-Australia Free Trade Agreement has increased the competitiveness of Australian wine exports with tariffs reducing from 14 per cent to 2.8 per cent. Growth in value of exports since the implementation of the Free Trade Agreement has averaged 44 per cent per year since 2015. Monthly export value is yet to establish a seasonal pattern which implies demand is still growing and the market is yet to reach a demand/supply balance. We expect another year of strong growth in wine exports to China particularly in red wine. Considering the growth since the FTA, it’s possible that the value of wine exports to China could surpass $1B in 2018.

Table grape production in Australia has grown by 23 per cent since 2014. The majority of supply comes from Victoria around Mildura and Robinvale. Production in the Robinvale area increased significantly in 2016 up 49 per cent to 40,153 tonnes. Production around Mildura was up 37 per cent in 2016 to 64,900 tonnes. Melbourne market prices for Victorian produced white table grapes were on average 16 per cent higher in 2017 at $2.58/kg. Red table grapes were down by 16 per cent in 2017 averaging $2.68/kg.

Domestic consumption continues to be flat, with production growth being driven by export markets. Export value increased two per cent in 2017 to $373M. Australia’s largest market for table grapes is China. Total value increased 46 per cent in 2017 to $148M. Aside from China, the value of table grapes fell in other major markets such as Indonesia down by 11 per cent to $50M and Japan down by five per cent to $29M. Average unit price increased to $3.49/kg across all markets, up 4.6 per cent compared to 2016. Average unit price for fresh grapes into China increased six per cent to $3.60/kg. Average export price has continued to rise since 2012, which is an indicator of strong demand.

Despite total export volume falling in 2017, the growth in demand from China in the last two years puts the industry in an excellent position to continue production growth in 2018 and beyond.

$1BAustralian wine exports

to China could reach

in 2018

Australian wine export value increased

in 2017

46%Table grape exports

to China increased by

in 2017

13%

Source: GTIS

$-

$100

$200

$400

$300

$600

$700

$800

$500

Wine

2015 2016 2017

Table grapes

Exports of wine and table grapes to China

1918

Recent conditions in Australia have been characterised by above average rainfall and warmer than average temperatures in the west. Queensland conditions have been below to very much below average rainfall with above average temperatures. The southern states have received average rainfall in the Riverina with warmer than average temperatures. Tasmania has experienced its highest average temperatures for November to January.

The ENSO Outlook remains at LA NIÑA status, however recent observations in the tropical Pacific suggest this event may be in the early stages of decline. Climate models also suggest this event may have peaked, with all model outlooks indicating the tropical Pacific Ocean is likely to continue to warm, and most suggesting a return to neutral by April 2018.  This would be in line with typical El Niño / La Niña evolution, where events tend to peak in December / January and transition back to neutral in the autumn months. (BOM 2018)

A late monsoon season has delayed rainfall in Queensland, with much of the wet season rainfall yet to fall. A weak La Niña is nearing its peak in the tropics. The rainfall outlook for February to April is likely to be more rain in Western Australia and the Northern Territory. Tasmania and eastern Victoria is likely to be wetter than average for the next three months. Temperatures are likely to be warmer than average in Tasmania and Queensland but cooler than average in Western Australia and south eastern regions of NSW. Irrigation catchments are lower than this time last year in Victoria and could do with a top up. Water storages in Tasmania are higher than this time last year which is a positive for local irrigators.

Seasonal conditions

Chance of exceeding median maximum temperatures February to April 2018.

Chance of above median rainfall from February to April 2018.

Source: Bureau of Meteorology (BoM)

Source: Bureau of Meteorology (BoM)

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