Strong dollar pressures food exports

09/07/2008 - 22:00

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Changing diets in the world's emerging economies and global food security issues could potentially present the local food industry with a wealth of opportunities.

Strong dollar pressures food exports

Changing diets in the world's emerging economies and global food security issues could potentially present the local food industry with a wealth of opportunities.

Harvey Industries' Michael Rapattoni believes there are a several opportunities for food businesses to capitalise on global food trends and the changing dietary requirements from growing economies such as China and India.

"Food security around the world is going to be one of the biggest issues I think facing the globe, and that's where I see a lot of opportunities," Mr Rapattoni told the WA Business News forum.

"Look at the global situation. Japan produces about 40 per cent of its food consumption and it has to import 60 per cent of it. You then have a look at the emerging markets like the meat industry in Russia, which is going absolutely ballistic.

"My view is that there's only so much food to go around and it's just a matter of time before it all evens out."

But while local food businesses could potentially capitalise on the growing global demand for food, some are presented with major barriers to exporting.

The increase in the Australian dollar has made exporting an unviable option for many local businesses.

Mr Rapattoni said the shift in the Australian dollar had placed major pressure on his business, which exports about 70 per cent of its product.

Fonterra WA managing director Peter Tedesco said the company used to export to Japan, but declining milk supplies, compounded by the shift in the dollar, meant the company now only exported a small amount of product.

Pacco Group's Leanne Wesche said the cost of airfreight had made exporting some of her company's products less economical and uncompetitive in the global market.

"It's very hard to compete when exporting wrapped fresh produce because of high air freight costs," she said.

"We're paying $1 per head of lettuce into South-East Asia. It's ok on a high-priced item, but for fresh produce it's hard to compete on the world scale."

Canon Foods managing director Richard Pace said the fluctuations in the currency also made exporting unviable for his business.

Mr Pace said a previous experience with exporting to Japan in the mid 1990s had influenced his decision to focus on the local market, mainly because of the costs.

"The export market is a lot tougher because it introduces a lot of other factors into your business," he said.

"We made the decision at that time that, if my business was going to grow at the size needed, to focus on the local market because you've got far greater degree of control.

"As a small business, I chose to focus on markets I had a greater degree of knowledge of and control of the outcome, rather than go offshore."

The high cost of compliance and strict regulatory requirements for exporting were also a deterrent, the forum heard.

"Being a food manufacturer, we have regulation for Australia, but for feeding someone in Japan I've got to achieve this [higher] level of regulation," Mr Pace said.

"You can't have products for an Australian person and a Japanese person sitting next to each other in the same freezer; they have to be segregated. It's really ridiculous."

But some in the industry believe the high level of compliance in WA could actually be a benefit to some export markets.

Ambrosia Quality Foods' John Percy said he has received interest from several parties interested in buying from WA producers because of the state's perceived clean, green status.

"There's been interest from Japan, in part because they are concerned about the welfare of the products they buy from China. They're coming to say, 'we wouldn't mind talking to you just in case (there are) problems with those other countries that are manufacturing'," he said

"They're looking to cover themselves if there was ever an international crisis from these low-cost manufacturers. They're saying 'could we manufacture a product here if we had to'?

"Perhaps in promoting Australia as a green manufacturer, that's one thing we can maintain, and that's the levels were talking about.

''So one day there may be a benefit in having that higher level of development of processing quality."

Food Industry Association of WA chief executive Andrea Berteit said the food industry was no different to any other industry in terms of exporting, in that there were certain areas where local producers were competitive and areas which they weren't.

"It really depends on what area you are in and whether we are able to grow from our small state here in that volume into the world where it can actually compete against some of the major low-cost suppliers.

"Some markets are still very subsidised."

Ms Berteit believes that some WA businesses in the extreme premium niche market, including beef, snails and truffles, are experiencing export success.

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