📰 Free on Board's Agri Headlines gives an outline of notable news in the agriculture space. For this week, we answer questions like: Why are Australian sheep and wine exporters welcoming the new Free Trade Agreement with India?
How has the resurgence of COVID is affecting China's fresh produce industry, and what are the continuous effects of the Russia-Ukraine conflict on the global grain market?
Tune into Episode 13 to learn more about the situation.
💻 Want more agricultural insights? Get smarter and stay updated on the most important agricultural updates on https://www.tridge.com/intelligence-data.
0:00 Hey, thanks for stopping by, this is Free on Board, a podcast by Tridge
0:04 You're in the right place if you're looking to stay up to date with the latest food and agricultural news
0:08 Now onto the updates
0:19 [Ben] Welcome back to Agri Headlines where we will be keeping you up-to-date on the latest agricultural news of Week 15, 2022.
0:27 I'm Ben, a Global Market Analyst at Tridge.
0:29 [Hyesun] and I'm Hyesun, also a Global Market Analyst here.
0:32 [Ben] We have three stories prepared for you today.
0:33 [Hyesun] Yes, absolutely.
0:34 And this is the first time you're officially joining us on the pod, right?
0:38 [Ben] Yes.
0:39 [Ben] As an agricultural enthusiast myself, I'm super excited to be part of this.
0:42 [Ben] So let's dive right in.
0:44 [Ben] For our first story, we will look at the Free Trade Agreement between India and Australia.
0:49 [Ben] Our second story is about the resurgence of COVID-19 in China and its surrounding countries.
0:54 [Ben] And for our third story we delve into the destabilizing effects of the Russia Ukraine conflict on the global grain market.
1:01 [Hyesun] Okay, so lead us through the first issue. The new trade agreement between India and Australia has been creating a lot of buzz in the industry.
1:07 [Ben] Yes, On April 2nd, Australia and India signed an interim Free Trade Agreement that removes the 30% tariff rate on sheepmeat, which will make it a lot easier for Australian lamb and mutton to make their way to India.
1:19 [Hyesun] Right. What's interesting is that this agreement with Australia and India is seen as a way for Australia to decrease its dependence on China, which is Australia's second-largest market for sheepmeat exports.
1:30 [Hyesun] After the two countries did not exactly leave off on the best of terms
1:34 [Ben] Yeah. Back in 2020, China placed a ban on a couple of Australian beef suppliers from entering Chinese soil and also placed a massive tariff on Australian barley and wine.
1:44 [Ben] For wine, the ban was up to 200%.
1:47 [Hyesun] Wow!
1:48 [Ben] I know. Tensions between the two countries stem from Australia insisting the WHO
1:52 [Ben] conduct an inquiry into COVID-19’s origins and also from China's attempt to shift away from being overly dependent on Australian exports.
2:00 [Hyesun] Right. And it continued through 2021 as well when China declared that it will not be importing coal from Australia for being friendly with the US and very recently there was another scuffle over the security treaty between China and the Solomon Islands for which Australia was also involved.
2:14 [Ben] But going back to Australia's agreement with India, it's interesting because India is already pretty self-sufficient in terms of sheepmeat.
2:21 [Hyesun] So how exactly are they planning on selling their sheepmeat then?
2:25 [Ben] Yes, so Australian suppliers are looking to actively market and sell their sheepmeat to high-end Indian retail markets and gourmet restaurants with the elimination of the tariffs.
2:33 [Ben] This is also true for wine where Australian suppliers are expecting new opportunities for high-value products, many of which are sold by small to medium-sized businesses.
2:41 [Hyesun] And on to our second story, in March, China has experienced a resurgence of COVID-19 in the form of the highly transmissible omicron variant.
2:50 [Hyesun] In an effort to combat the spread of the virus, the Chinese government imposed renewed lockdown measures on top of its already strict zero-Covid policy.
2:59 [Hyesun] So let's look at what impact these measures have had on the fresh produce sector.
3:03 [Ben] Current lockdown restrictions of movement within China.
3:06 [Ben] hinder the ability of farmers to cultivate and harvest produce,
3:10 [Hyesun] They are literally not able to move or get out.
3:12 [Ben] Yes which also disrupts the downstream value chain.
3:15 [Ben] They can't move goods from the side of production to market.
3:18 [Hyesun] Right. And also zero-Covid restrictions are delaying and disrupting the import of fresh produce into China.
3:23 [Ben] Which means lower supply and higher transportation costs of fresh produce, which in turn results in higher prices of fresh produce in general.
3:30 [Hyesun] Exactly.
3:31 [Hyesun] A prime example is the price of fresh cabbage, which surged by 314% year over year in the second week of March to a record high USD 0.76 per kilo.
3:42 [Hyesun] Even before the price surge, Chinese cabbage prices were already higher than at any time in the past five years,
3:47 [Ben] Which was because of?
3:48 [Hyesun] It was because of high demand for fresh cabbage during the Chinese New Year and the Beijing Winter Olympics.
3:54 [Ben] That makes sense.
3:55 [Hyesun] Yes.
3:55 [Hyesun] And also because of unfavorable weather conditions which led to its decline in the yield, resulting in lowered cabbage supply and soaring input and transportation costs.
4:04 [Ben] Yes, and China's strict COVID-19 surge is also affecting fresh produce that entered China from other countries.
4:11 [Ben] Vietnam's fruit and vegetable export value to China dropped by 19%
4:16 [Ben] year on year during January and February 2022.
4:19 [Hyesun] So what's Vietnam going to do now?
4:21 [Ben] Well, Vietnam has explored alternative markets with exports to the US growing 70% during the first two months.
4:27 [Ben] While exports to Japan are up 12%.
4:30 [Hyesun] How about in other countries?
4:31 [Ben] Well, Thailand exports more than 80% of its durian fruit to China. Prices started declining in March down 20.74%.
4:40 [Ben] as the country struggled to find an alternative market.
4:43 [Hyesun] I guess this means more Vietnamese fruits and Thai durians for the rest of the world.
4:46 [Ben] Yes, definitely.
4:48 [Ben] For our last story, the Russia-Ukraine conflict continues to have a destabilizing effect on the global grain markets.
4:54 [Hyesun] Grain prices were already high and volatile before the conflict.
4:57[Hyesun] For the harvest in South America, strong global demand and pandemic-related supply chain issues
5:02 [Hyesun] have reduced grain inventories and driven prices to their highest levels since 2011 and 2013
5:05 [Ben] Then came the Russia-Ukraine conflict which is creating major disruptions in the grain market, especially in the supply of wheat and corn.
5:13 [Hyesun] Right. Russia and Ukraine are vital players in the global grain market
5:17 [Hyesun] together accounting for 26% of global wheat and 14% of global corn exports.
5:23 [Hyesun] So it's currently not smooth sailing on the grain export side.
5:27 [Hyesun ] Pun definitely intended.
5:29 [Ben] Ukraine exports 98% of its grain through its ports which are blocked by Russian warships off Ukraine's southern coast
5:36 [Ben] preventing cargo ships from leaving the ports including the major hub of Odessa and the Black Sea.
5:41 [Hyesun] Meanwhile, Russia has banned grain exports to ex-Soviet Union countries including Armenia, Belarus, Kazakhstan, and Kyrgyzstan
5:48 [Hyesun] until the end of June 2022.
5:50 [Hyesun] Russian President Vladimir Putin is also set to closely monitor food exports to countries that are hostile to Russia, potentially causing further disruptions in grain supply.
6:00 [Ben] These disruptions in supply cause volatility in global grain prices with ultimately higher prices as a result.
6:07 [Ben] Corn futures are trading 16% higher compared to pre-conflict levels
6:11 [Ben] while wheat futures are up 25%.
6:13 [Hyesun[ The inconsistent supply, combined with higher prices is leading to global food security concerns.
6:19 [Ben] Definitely. Russia and Ukraine supply millions of tons of grains to food import-dependent developing countries
6:25 [Ben] in the Middle East, North Africa, South Asia and sub-Saharan Africa.
6:30 [Hyesun] So, Ben, you are in South Africa, what are the price effects like for everyday consumers over there?
6:36 [Ben] Well, food prices are up 8% year on year for February 2022 compared to 2021.
6:42 [Ben] But we are not an isolated case.
6:44 [Ben] Globally, food is 20% more expensive than it was a year ago with prices rising 4% since January 2022
6:51 [Ben] In essence, the conflict is making everyday life more expensive
6:55 [Hyesun] Which is definitely not an ideal situation.
6:58 [Hyesun] An ongoing conflict will certainly drive prices higher still and erode food security for hundreds of millions of people.
7:04 [Ben] Yes, all we can do is hope for a quick and peaceful resolution to the conflict.
7:09 [Hyesun] That's very true.
7:10 [Hyesun] However, an end to the conflict does not necessarily mean a quick return to pre-conflict market conditions.
7:16 [Hyesun] Looking back, most staple food prices also showed excessive volatility in the aftermath of the 2008
7:23 [Hyesun] global food price and financial crises all the way up to 2012.
7:27 [Ben] Post-conflict sanctions on Russia are another possibility.
7:30 [Ben] Ukraine, on the other hand, will need to conduct much-needed repair and maintenance work to the infrastructure damaged during the conflict.
7:37 [Ben] Thus, medium-term price and supply volatility could be a reality in the global grain market.
7:43 [Hyesun] And that is all for our headlines today.
7:44 [Hyesun] We will see you all with a story next week.
8:03 If you enjoyed this episode, please leave a review, subscribe, and share our podcast
8:08 Check out tridge.com/intelligence-data for more price analyses and up-to-date insights into the food and agricultural industry