After Beef Week it was a nice change to head to Western Australia in late May and talk to some lobster growers about their industry and their key market, China.
Australia’s rock lobster industry is small but fascinating – partly, because of its high value but also because of its export trade. Representing about three per cent of Australia’s seafood production by weight, it accounts for about 20pc of the seafood industry by value. WA is the biggest producing state, with over 50pc of production by value.
In recent years, the industry has been through a degree of restructure with the implementation of quotas limiting catch size to ensure a sustainable production system. With these in place, production has remained relatively stable for the last eight years and places like WA are now considering if they can increase their catch limits.
The big story for the lobster industry has been the opening up of the Chinese market. Previously large volumes of Australian lobsters were sent to Hong Kong and Vietnam as part of the ‘grey channel’ into China, with smaller volumes sent to Japan and the US. More recently, a greater volume is now going to China directly. Removal of tariff barriers under the China/Australia FTA and the ability to access higher value markets through the official channel is proving to be attractive. The average price per unit of exports direct to China has increased from $51/kg (2010-11) to $83/kg (2016-17) to become the highest value market, surpassing Hong Kong and Vietnam. Together with Hong Kong and Vietnam, China now accounts for over 95 per cent of Australia’s lobster exports.
This dominance of China in the export marketplace, however, does raise problems with concentration risk and makes it vitally important to understand what is happening in that market. As part of the conversations with WA lobster fishermen, we heard from Rabobank’s China animal proteins analyst, Chenjun Pan, on what is currently happening in the Chinese market.
At the broader level, the Chinese economy is slowing slightly but forecasts for GDP growth rate still remain above six percent. Their population is ageing, their workforce is declining and they are becoming increasingly urbanised.
Beyond the economic trends, Chenjun noted a number of consumer trends that are taking place in China and which are important for all suppliers of food products to China to be aware of. These included, increasing wealth (per capita disposable income increased by 40pc between 2012 and 2017) and the consumption of western-style foods. The millennials and baby boomers that now make up 50pc of the population seek engagement and innovation, and value for money and service.
All of these trends offer opportunities for Australian food export to China but we must be mindful of the bigger geopolitical picture and our exposure to this market.