Global market still vital to Australia

But success in export markets required a long-term view and tolerance that sometimes company made mistakes.

Rabobank’s general manager food and agribusiness research and advisory Tim Hunt told the conference the world market was still the primary price-setting mechanism for much of the Australian market.

“And I can I tell you by looking around the world in places like Europe and the United States that the share of our exports can fall even 15 or 10 per cent and the world market would still be extremely influential on price setting in this marketplace,” he said.

The global market also provided the key opportunity for growth, although it was now difficult for Australian to be a major source of cost-competitive ingredients.

Australia was now looking to be a supplier into Asia, particularly China, of high quality, traceable products with a providence story.

Mr Hunt warned that Australia was not the only country to look at doing this. Dairy industries in Europe – particularly the Netherlands, Denmark, Ireland and the United Kingdom – were looking to tell a similar story about their products.

This new approach also brought new risks. If a major market for a commodity product such as skim milk powder changed the rules, it was relatively easy to place that product elsewhere. But it would be more costly to place a value-added product, with for example labels designed for a particular market, into a new market. The value-added products also required more investment upfront.

The potential impact of unexpected shock in a market was shown last year when changes in China saw Bellamy’s and Murray Goulburn, who had experienced runaway growth in sales in products, suddenly left with inventories of stock.

Mr Hunt said Asia should not be viewed by Australian companies as their place in the world. “It is still our place to be won and then vigorously defended; a highly demanding marketplace that can be highly competitive,” he said.

The companies that did better operated in partnership with local players, had a long-term view and had a tolerance for inevitable missteps. “There is not a multinational dairy company in the world that I am aware of that has not made some mistake as they enter emerging markets,” he said.

“It is very difficult to get it right all the time. What defines them is how they respond to those mistakes and obviously their ability to make more right steps than wrong steps over the longer term.”


Source: AdFarmOnline



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