1. EXPORT POTENTIAL AND EMERGING MARKETS 21 January 2016 James Dee

2. Markets and Gross Margin Considerations  Markets - Export, Interstate, Domestic  Supply Chain – the shorter the better – Good information exchange  Competitiveness – Cost of product, Product differentiation  Import protocols – biosecurity requirements and impact on product  http://micor.agriculture.gov.au/Plants/Pages/default.aspx#k=  Free Trade Agreements and Exchange Rate Implications

3. Avocado Gross Margin (40ha enterprise) TOTAL$/HA Revenue (16.5t/ha @ $3.90/kg$2,574,000$64,350 Variable Costs$563,040$14,076 Gross Margin - Income less expenses $2,010,960$50,274 Key Points 1.Interstate market focus – potential for export 2.Perennial crop 3.Development cost per hectare $33,288/ha 4.Cash flow – year 3

4. Strawberry Gross Margin (16ha enterprise) Total$/ha Revenue (526,250punnets/ha @ $1.30 per punnet) $ 3,250,000$203,125 Variable Costs$ 2,732,064$170,754 Gross Margin - Revenue less variable costs $ 517,936$32,371 Key Points 1.Export market focus 2.Annual crop 3.Development costs ($44,821/ha) 4.Cash flow in the first year

5. Broccoli Gross Margin (10ha enterprise ) TOTAL$/HA Revenue (1630 cartons/ha @ $16.90 per carton) $ 274,630$27,463 Variable Costs$ 252,030$22,019 Gross Margin - Revenue less variable costs $ 54,440$5,444 Key Points 1.Export market focus 2.Annual crop 3.Development costs ($22,950/ha) 4.Cash flow in the first year

6. Gross Margin of Apple Production (40ha enterprise) TOTAL$/HA Total revenue – (50t/ha @ $1.36/kg)$2,715,000$68,000 Total variable costs$941,884$23,547 Gross Margin - Income less expenses $1,773,115$44,453 Key Points 1.Interstate market focus – potential for export 2.Perennial crop 3.Development costs ($71,922/ha) 4.Cash flow – year 3

7. Gross Margin for Blueberry Production (5ha enterprise) TotalPer ha Total Revenue ($36/tray* 8000 trays/ha) $1,444,000$288,000 Variable costs$1,149,830$229,966 Gross Margin - Revenue less variable costs $290,170$58,034 Key Points 1.Domestic market focus – potential for export 2.Perennial crop 3.Development cost per hectare $125,975/ha (5ha only) 4.Cash flow – year 2

8. Gross Margin for Seed Potato Production (40ha enterprise) TotalPer ha Total Revenue (41t/ha @ $950/t) $1,589,440$39,736 Total cost (B)$1,091,840$27,296 Gross Margin - Revenue less variable costs $497,600$12,440 Key Points 1.Export market focus 2.Annual crop 3.Development costs ($22,950/ha) 4.Cash flow in the first year

9. Fresh Sweetcorn Gross Margin (20ha enterprise) TOTAL$/HA Revenue (2,150 cartons/ha @ $11.00 per 16.5kg carton) $ 473,000$23,650 Variable Costs$ 256,900$12,845 Gross Margin - Revenue less variable costs $ 216,100$10,805 Key Points 1.Export market focus 2.Annual crop 3.Development costs ($22,950/ha) 4.Cash flow in the first year

10. A List of Potential Crops Product Enterprise Unit Total Income Variable Cost Gross Margin Gross Margin/Ha Avocado40 Ha$2,574,000$563,040$2,010,960$50,274 Strawberry 16 Ha$3,250,706$2732,064$517,936$32,371 Broccoli 10 Ha$274,630$252,030$54,440$5,444 Apples40 Ha$2715,000$941,884$1,773,116$44,453 Blueberry 5 Ha$1,275,000$1,149,830$125,170$58,034 Seed Potato40 Ha$1,589,440$1,091,840$497,600$12,440 Sweet Corn20 Ha$473,000$256,900$216,100$10,085

11. Free Trade Agreement with Korea  Korea Australia Free Trade Agreement (KAFTA) provides quick tariff elimination on most of our horticultural exports.  Key crops are  Cherries  AlmondsNutsPeanuts  ApricotsPeachesPlums  Mangoes  Tomatoes  Processing potatoes

12. KAFTA and Cherry Export Case Study  Australia exported 250 tonnes of cherries to Korea in 2014-2015  Compared to 5 tonnes in 2013-2014  In value term export went up from $69,000 to $3.5 million  This was possible due to 24% tariff reduction under KAFTA  However, the biosecurity protocols remain the same – which is valid for all the Free Trade Agreements (FTAs).

13. Japan Australian Free Trade Agreement  Japan Australia Economic Partnership Agreement (JAEPA) may provide a liberalising outcome across Australian Horticultural Sector.  Immediate elimination of tariffs on mangoes, dried grapes and a range of berries.  To take advantage of counter seasonal production, JAEPA also gives preferential advantages for table grapes, oranges and cherries.  Significant tariff reduction for fruit juice, broth and jam exports.

14. China Australia Free Trade Agreement (ChAFTA)  Australian horticultural exports to China was $56M in 2014 up from $13M in 2010.  China applies very high tariffs on horticultural exports and the market is complex but lucrative.  Under ChAFTA  Elimination of 10-30% tariff on fruits within 4 years  Elimination of 10-13% tariff on fresh vegetables.  Immediate advantage to citrus, grapes almonds mangoes and cherries due to existing quarantine access protocols.

15. Useful Websites  Free Trade fact sheets  http://dfat.gov.au/trade/agreements/kafta/fact-sheets/Pages/fact- sheet-trade-in-goods.aspx http://dfat.gov.au/trade/agreements/kafta/fact-sheets/Pages/fact- sheet-trade-in-goods.aspx  Importing Country Requirements – Phyto Database  http://www.agriculture.gov.au/export/controlled-goods/plants- plant-products/plantexportsmanual/volume- 4?wasRedirectedByModule=true http://www.agriculture.gov.au/export/controlled-goods/plants- plant-products/plantexportsmanual/volume- 4?wasRedirectedByModule=true  Manual of Importing County Requirements  http://micor.agriculture.gov.au/Pages/default.aspx http://micor.agriculture.gov.au/Pages/default.aspx  AusTrade Information  http://www.austrade.gov.au/Australian/Export/Export- markets/Countries

16. Conclusion  Potential profits for various horticultural products are significant as indicated by their gross margins.  Large scale producers are likely to be more profitable and export needs to be a major focus.  Free trade agreements with Japan, China and Korea opens up new opportunities and lucrative markets.

17. Contact Details  James Dee  Development Officer  Department of Agriculture and Food, Western Australia  PO Box 1231 Bunbury WA 6230  t +61 (0)8 9780 6285 m +61 (0)429 687 050  Email james.dee@agric.wa.gov.au  w agric.wa.gov.au