High fuel prices hit Victorian ag exporters

Agriculture Victoria reported the effects of major disruptions to supply chains, due to COVID-19, had shown up in Victoria's food and fibre exports for last financial year.

While Victoria still made up 27 per cent, or $14 billion, of all Australia's food and fibre exports, the value was down 3pc, or $476 million, on the previous financial year.

The Victorian Food and Fibre Export Performance report for 2020-21 showed grains bucked the trend, with a value of $2.5 billion, up $1.5 billion or 132pc on the previous year.

Read more: Victorian food and fibre exports take a COVID hit

Freight and Trade Alliance International Freight and Logistics head Anthony Vinson said there were still serious disruptions within global supply chains, affecting exporters access to overseas markets.

Mr Vinson said there was still a lack of shipping line vessel capacity, with companies strictly controlling 20 foot-equivalent-unit containers (TEU) and refrigerated refers, due to overall demand and port congestion.

"Shipping lines are shifting vessel assets to more lucrative trade lanes due to higher freight rate returns, such as Asia to North America-Europe and repositioning empty containers back to Asia from Australia as their main priority."

Read more: Freight cost, container woes continue

Mr Vinson said the northern hemisphere had seen lower crop production in recent years, opening up 'huge opportunities' for Australian farmers to fill that, given the torrid years of drought and bushfires.

But he said exporters were still facing global logistics and market challenges - and would for some time to come.

Mr Vinson said the outlook remained mixed, with the Drewry global 40-foot TEU container index below USD $9000 for the first time since July, last year.

But that was still USD $6,130.00 higher than the five-year spot freight rate average of USD $3,156.00/40 TEU.

The biggest challenge was the ongoing conflict between Russia and Ukraine, which had seen a huge increase in the bunker fuel price from USD $700.00/MT to more than USD $900.00/MT for the first time.

At the same time, air freight market and dynamics remained extremely volatile and fragile, due to COVID and the ongoing war.

Jet fuel prices were at their highest level, since April 2011.

Air Freight capacity remained tight, but logistics service providers on most trade lanes with critical situations were looking to secure large block space booking agreements with airlines to ensure that they met customer requirements.

Slow port productivity, congestion and other schedule delays had also slashed shipping capacity by 15-20 pc, while there were also vessel delays and port congestion in the USA and northern Europe.

In China, that country's COVID policy and shutdowns were creating transport and supply chain bottlenecks.

Last financial year, Agriculture Victoria reported a decline in table grape exports of 20pc and dried grapes of 26pc.

Australian Table Grape Association chief executive Jeff Scott said growers usually experienced cool, to cold nights, during winter and reasonably warm days.

"During spring we usually have warm weather," Mr Scott said.

"This year, because of La Nina, the weather was exceptionally cool during spring and there has been lower humidity in Sunraysia, over summer," Mr Scott said.

That had resulted in late-maturing of grapes, so the season was about three to four weeks behind where it normally would be.

'We have had a slow start to the season, but we would hope we would increase our exports, from now on."

Most grape exports went to Asia, but sales had been hampered as growers and exporters were not able to meet with importers, due to the pandemic.

"They were not able to develop those relationships and networks - that's fallen away because of COVID and you could argue the demand has dropped, because of that."

He said the industry was looking forward to getting back to normal, being able to travel and establish networks and relationships.

"Hopefully, for the next season, it will pick up greatly."

Coupled with that were logistical challenges in obtaining containers and departure and arrival timelines.

"It has certainly disrupted us, yes.

"I am hoping, because of our late start, exports will slightly increase, compared with last year."

There were also challenges in the Chinese market, which took 40 pc of all product.

"A lot of growers are hesitant to go to China because of relationships with Australia - until that improves, we need to diversify and its very difficult to diversify with fresh fruit."

Horticulture exports were valued at $1.36b in 2020-21, a decrease of $248m, or 15pc, while volumes dropped by 7pc.

Fruit Growers Victoria industry development officer Michael Crisera said that cost pressures had continued but from a different area.

"The issue now is that the cost is not much different, it's gone up because of fuel prices so now we are copping another hit, with Ukraine," Mr Crisera said.

"There is definitely more availability of carrying space, still nowhere near prior to the pandemic, with stonefruit reliant on airfreight.

"It's starting to pick up a bit now, stonefruit season is done, but I would hope we would see benefit at the beginning of next season."

He said there were still delays with sea freight.

"Where we expect sea freight to get some some areas in two weeks it's taking three or four weeks," he said.

He said COVID-19 had 'definitely' had an impact on exports, last financial year.

Fuel prices would add to the cost of exports, squeezing competitiveness.

"It's going to present a real challenge, particularly when it comes to pears, which we tend to export quite a bit.

"Our main competitor is South Africa and they can do things a lot cheaper than us."