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The South Australian food ScoreCard showed a modest improvement over the last year, with rising domestic trade and consumption offsetting a modest fall in overseas exports. Overseas trade continued to face the twin hurdles of relatively low import prices and higher export prices associated with a relatively strong Australian currency, as well as low supply due to poor season conditions flowing out of the 2002/03 drought.
Employment across the food industry increased to a record 143,000 (up 5,100 or 4%).
The ‘headline’ gross food revenue figure increased from $8.9 billion in 2002/03 to $9.1 billion (up by $248m or 2.8%). Key to this modest improvement was growth in domestic food consumption (up $254m or 4.5%), with the all-important overseas export figure falling by $143m or 6.2% to $2.2billion.
Food production had mixed results, with ‘above average’ seasonal conditions producing a rebound in field crop and livestock production, contributing to an overall rise in farm gate values (up $210m or 7.7%) to 2.9 billion. Falls in production for dairy (down 14%), seafood (6%) and horticulture (2%) offset an otherwise good production result.
Both value-added food and commodities exports fell over the year, although the longer-term trends since the start of the food plan in 1997, showing annual average growth of almost 7%, illustrates that the State is outpacing the national average. Measuring value-added exports is particularly important in the ScoreCard analysis, as the State Food Plan has focussed industry effort toward higher value adding as a way of insuring against seasonal volatility associated with commodity focussed production.
In previous food ScoreCard reports we have argued that contractual obligations as well as the high ‘transaction’ costs associated with trade, are, in the short-term, likely to cushion some of the impact of currency appreciation. In simple terms, it takes everyone time to adjust to new prices and opportunities. The 2003/04 food ScoreCard results reflect a more complete picture of the impact of recent currency appreciation, with producers and processors adjusting their export strategies to compete in a new price environment.
Despite a small bounce in gross food revenue over 2003/2004, it remained below the high water mark of $9.4 billion set in 2001/02, and under the $10.1 billion benchmark growth level to achieve the target of $15 billion by 2010. To reach the target, SA gross food revenue needs to grow by over $600m per year, with the latest result achieving around half that. As shown in Figure 1, the poor seasonal conditions in 2002/03, and below average growth this year, means that the gap to target has increased to around $1b. The task of catching up to the target will be more difficult over the medium term, however, as the graphic shows, growth can be both rapid and seasonal, with South Australia still $250 million in front of where we would have been without the direction set by Industry and Government in the State Food Plan.
With the influence of seasonal conditions and the volatility of the Australian currency, it remains important to balance assessments of the latest annual changes against longer-term underlying trends. Figure 1 demonstrates the recent volatility of the food industry, showing the extent of Food South Australia’s challenge as the difference between the underlying or historical trend growth in gross food revenue and the target growth line. Despite recent events, the food industry has continued to maintain growth above the ‘average’ growth achieved in the decade prior to the development of the food target.
The graphic shows that even with the coincidence of negative influences over the past few years the State’s food revenue growth has lifted by an average of 6.3% per annum since 1996/97. This compares with average annual growth of 4.9% in the decade prior to the introduction of the food plan.
In previous ScoreCard assessments where exceptional positive seasonal influences have pushed the food industry beyond the target growth required to reach the 2010 target, we have cautioned against any ‘over’ interpretation of food industry progress. In 2003/04 we have seen a clear case of the cascading influence of poor seasonal production from previous years and the rising Australian dollar for exporters.