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Australian cotton - 'Three good reasons for optimism'

AUSTRALIAN cotton producers seem confident of another good year ahead in international markets, with Rabobank research supporting that optimism.

With the Australian cotton harvest completed, growers were greeted with the prediction by Rabobank that domestic prices would remain strong – above $520 a bale –  through 2017/18. 

The Australian Cotton Outlook – Three good reasons for optimism report, authored by Rabobank commodity analyst Charles Clack, cited Australian dollar weakness, the premium for Australian cotton due to its quality, and global economic recovery as the three factors underpinning the local sector’s profitability in the near-term.

Mr Clack said the near and medium-term outlook boded well for growth and investment in Australia’s cotton industry – and there was additional cause for optimism from the prospect of recovering Chinese import demand.

“This is despite the anticipated softening in global cotton prices, with the recent run of high prices driving an expansion in global acreage,” Mr Clack said.

“The US is expected to drive much of the four percent increase in global plantings that is foreseen in 2017/18, but production could also increase in India, Pakistan and China.”

Mr Clack said the increased global availability of cotton for export was likely to place downward pressure on world prices, despite strong demand which is forecast to increase as economic growth improves.

“In the next 12 months, we don’t see the increase in cotton demand exceeding the anticipated hike in global cotton production,” Mr clack said.

“However, Australian cotton prices are expected to be largely buffered from any fall in international prices, as the Australian dollar provides some offset.”

The cash premium for Australian cotton, he said, was also expected to remain high – over alternative origins – owing to Australia’s off-cycle export season and superior fibre quality. Australia was also seen as having a freight advantage into Asia.

Mr Clack said these factors, as well as strong hand-to-mouth demand from spinning mills as they replenish stocks, should support Australian prices above A$520 per bale in 2017/18 – shoring up profitability for many growers next year.

“However, much will hinge on production prospects, with the current season throwing up many challenges and resulting in highly variable yields,” he said.

CHINA DIFFERENCE

The Rabobank report found with the world’s ‘cotton heavyweight’ China looking for imports by the end of the decade, a golden opportunity could open for exporters, particularly Australia.

It cites Australian cotton’s superior quality, off-cycle export year, and market access as factors that should see it hold considerable competitive advantage over many other exporters.

“China currently holds 50 million bales in reserve,” Mr Clack said, “which is equivalent to 54 percent of global cotton stocks. However at their current destocking rate, Rabobank anticipates China could reduce their stocks by close to 10 million bales per year.”

Mr Clack said this would see Chinese stocks return to a more manageable 20 million bales by 2019/20. At this point, with consumption remaining at a similar level, a supply deficit of around 10 million bales per annum would need to be filled by a substantial increase in local production or a change in government policy to allow for more imports.

“Although it is too early to call, it appears that a combination of both these factors will be required to fill this gap,” Mr Clack said. This would be “putting Australia in the ‘box seat’ to fulfil Chinese demand, given its geographic proximity, reputation for quality, and export focus”.

www.rabobank.com

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Australian wineries uncork Chinese market boom

By Andrew Spence  >>

FINDING new routes to market that cut out the ‘middle man’ are emerging as the latest trend in the rise and rise of Australian wine sales in China.

China last year overtook the United States to become the biggest buyer of Australian wine, following a 40 percent growth in sales for 2016. Exports of wine to mainland China rose from A$370 million in 2015 to $520 million in 2016. 

Barossa Valley winery Seppeltsfield was to open a new wine chateau in China on May 13 in a joint venture with Minquan Jiuding Wine Company Ltd. It is the first Chinese chateau to have a part ownership stake by an Australian winemaker. The South Australian winery has a 37 percent stake in the $75 million project.

The news came as Chinese online retailer YesMyWine took a 15 percent share in major wine company Australian Vintage Limited.

The Seppeltsfield investment, to be known as Chateau Seppeltsfield Minquan, has been under construction for three years in the province of Henan, which is about three hours by high-speed rail from Beijing and Shanghai. It is also a one-hour drive east of Henan’s capital Zhengzhou, a city of almost 10 million people.

The chateau will sell Seppeltsfield and Minquan Jiuding wine and bottle bulk wine sent from South Australia. It is also aimed at China’s burgeoning wine tourism sector and will be used to market Seppeltsfield in the Barossa Valley to Chinese tourists.

Senior research scientist at the Ehrenberg Bass Institute for Marketing Science,  Justin Cohen, spends several months a year in China working on projects, some funded by Wine Australia and others to more broadly understand retail and media in a Chinese context.

Dr Cohen said investing in an area well away from China’s major ‘tier one’ cities presented an opportunity to introduce more people to Australian wine for the first time.

“When you think about population there may well be more than enough people within Henan to build a strong brand in the local market – China is not the kind of country where you can say ‘I’m going to be across the entire country unless you’re Coca-Cola’,” Dr Cohen said.

“This is a very exciting and ambitious project and I think it could do wonders in helping build the awareness of Australian wine in parts of China that have not had much investment previously from a market development standpoint.

“The Australian model previously has been to attract Chinese investors into Australian wine brands and then they can use their relationships to help trade the wine in China but this is obviously a different type of relationship where they are investing into a Chinese business.

“The real litmus test will be if we start seeing representatives from other Chinese chateaus and wine businesses suddenly coming to the Barossa, McLaren Vale, Hunter Valley or Margaret River looking for Australian business partners.”

Dr Cohen said many larger Australian wine brands were moving away from the traditional model in Australia of establishing relationships with specialist distributors.

He said e-commerce as a platform for selling Australian wine to Chinese consumers was growing fast and also cut out ‘the middle man’.

“The biggest companies are moving away from working with specialist distributors and are doing deals directly with large retail groups and that is allowing them to bring their wines to the market at a lower price point,” Dr Cohen said.

“There are definitely some online platforms doing some great things in terms of education and engagement to make wine more accessible but it is still pointed at the top end of the market.”

Henan, in Central China’s Yellow River Valley, is home to the Shaolin Temple and has a population of about 95 million. It is the third most populous province in China and has the fifth largest provincial economy.

“I think growth is going to come from getting new buyers into the category and that’s what is very interesting to me with the Seppeltsfield project,” Dr Cohen said.

“You’ve got a part of China that most people have never even heard of and you’re going to have people that know of Australia because of other products such as milk powder or beef and it’s an opportunity to get them excited about wine.

“The gateway is through Chinese wine because it’s cheaper than imported wine but if they are able to bring quality Australian wine to the market at a competitive price point then it will be exciting to see what it can do to bring new wine drinkers into the category.”

According to the Organisation of Vine and Wine, Australia was the world’s fifth largest wine-producing nation in 2016 behind Italy, France, Spain and the US.

South Australia is consistently responsible for about 50 percent of Australia’s annual production and 75 percent of the nation’s premium wine.

The Barossa Valley produces world-renowned brands such as Penfolds GrangeJacob’s Creek and Wolf Blass.

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Govt’s Fair Farms plan seeks ‘fair go’ for workers, growers

THE Federal Government has steered its Fair Farms initiative through stakeholders in the horticulture industry in a bid to restore consumer and public confidence in the sector as an ethical employer.

Fair Farms aims to offer growers in the horticulture sector “the tools they need to ensure workers are treated fairly” according to Assistant Minister for Agriculture and Water Resources, Anne Ruston. The industry has been hit by media exposure of unfair work practices, especially in relation to international students working in the sector on temporary working holiday visas. 

Development of the Fair Farms Initiative was led by Growcom, Ms Ruston said, with support from the Queensland Horticulture Council, and funded by the Australian Government through the Fair Work Ombudsman's Community Engagement Grants Program.

“I deal first-hand with many growers across the nation, and I know that the vast majority of growers work hard to do the right thing, treating their workers fairly and complying with workplace laws,” Ms Ruston said.

“It is extremely unfortunate that the reputation of this fantastic industry that has been built by hardworking Aussies has been negatively affected by the actions of a few.

“The Fair Farms Initiative will help ensure growers have the tools and knowledge to treat their workers fairly and ethically, including through education, benchmarking and certification.

“It will also help to restore the reputation of the horticulture sector, so that consumers and the wider public can be confident that the sector takes an ethical approach to workplace relations.”

Ms Ruston said the initiative would comprise five main components, starting with a series of information articles on key workplace relations issues being published in industry magazines including Fruit and Vegetable NewsVegetables Australia and other regional and industry publications.

Ms Ruston said the Hort360 Workplace Relations best management practice (BMP) module would also be rolled out nationally, over the next four years, to enable growers to do a confidential risk assessment of their current practice and identify areas for improvement.

Targeted regional seminars are planned throughout Australia focusing on key areas of non-compliance.

Another key intiative is the development of a voluntary third-party Audited Certification for growers, through Freshcare, to enable them to demonstrate compliance.

Ms Ruston said the final chapter of the initiative was “the development of a pathway to qualifications in Human Resources, for interested growers”.

http://bit.ly/FairFarmsInitiative

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Honey Gold-plated success in NT for Pinata

EXCLUSIVE Honey Gold mango producer, Piñata Farms, will continue to expand plantings in the Northern Territory – now a major growing region – following a successful 2016-2017 mango season.

Piñata Farms  managing director Gavin Scurr said the volume produced over summer was consistent with previous years, despite being three weeks shorter. 

He said this was due to late winter flowering in the Northern Territory, which delayed harvesting by a fortnight, and record heat in Queensland which sped up ripening and ended the season a week earlier than usual.

Piñata Farms and 36 contracted growers produce Honey Gold mangoes in five states for progressive harvesting between November and March. About 170,000 trees are under cultivation.

“Volume was down in the Northern Territory and up in Queensland, so, overall the season came home well for us," Mr Scurr said.

“At our Wamuran farm on the Sunshine Coast, it usually takes 240 days from flowering to harvest. Due to the ongoing heat in Queensland, it took only 225 days.”

An additional 11,000 trees would be planted near Katherine and Darwin this autumn for full production in 2024, he said.

CONSISTENT CROP

Mr Scurr said the mid-season Honey Gold variety was a consistent performer and continued to hold fourth spot in the Australian mango market behind Kensington Pride, Calypso and R2E2.

Strong domestic demand and record grower returns meant less than one percent of the crop was exported over summer, he said.

“Australian consumers recognise the Honey Gold mango is a premium product and they’re prepared to pay a little bit more for it,” Mr Scurr said.

Planting of new trees will begin in May and take about six weeks. Trees will begin producing fruit in about three years and progressively increase yield until they reach full production. Three of Piñata Farms’ third party growers also expanded plantings by some 9,000 trees late last year.

Piñata Farms hosted its annual Honey Gold Conference at Airlie Beach on May 1-2. The event, attended by Honey Gold growers from throughout Australia, is an annual opportunity to review the past season and forecast the next. Piñata Farms also presented various awards including Honey Gold Grower of the Year.

Piñata Farms has also announced it will continue to trial late variety Princess mangoes in Queensland and the Northern Territory, following promising early results.

A small volume of Princess mangoes was harvested in March for initial review.

“It’s early days yet, so we'll assess again next summer before deciding if we proceed commercially,” Mr Scurr said.

Princess mangoes have a magenta-coloured skin and orange flesh. Trial crops are growing in Queensland and the Northern Territory.

www.pinata.com.au

 

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