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Growing global: Horticulture exports

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Australia's horticulture export industry is a well-established and long-running enterprise featuring a diversity of products second to none. Everything from cherries to cut flowers is sent offshore to fill demand in an increasingly consumer driven world. Horticulture is the fastest growing sector of agriculture in Australia-larger than dairy and wool combined-with a farm gate value of $9 billion. Horticulture Australia Council CEO Kris Newton says although 180 horticulture commodities are exported, the sector is still a relatively small export market by Australian standards. Maxwell Summers, CEO of the Australian Horticultural Exporters Association, says the industry exports to all major global markets but primarily Asia, which take 65 percent of our horticultural exports. This is based on a long-standing relationship and proximity to our northern neighbours. With world population growth continuing to escalate, there’s a growing demand for food but it doesn’t automatically equate to a growing demand for our horticulture products. There are many hurdles for those in this diverse industry, and making inroads into international markets can be time consuming, costly and complicated.

New exporters

Tim Reid, chair of the newly formed Office of Horticulture Market Access, says simply having a product is not enough to qualify you for entry into the ranks of exporter. "Horticulture market access to a foreign country has to be negotiated on a national government to national government basis," he says. "Our organisations cannot just go overseas and negotiate with international governments for market access to be granted for our products. We have to work through the Australian government and mainly through Biosecurity Australia." And even then it’s not easy. The red tape and negotiation can take years or even decades. But Reid says there are fundamental criteria and risk assessments that potential exporters need to consider. Is there an international market for your product? Are you able to supply it? Do you have the ability to increase production to meet an increase in demand? Do you have quarantine issues? Are you in a fruit fly free zone? Horticultural exports are often developed on a regional basis, rather than looking at individual cases, so it is a good idea to know what local producers are doing. Summers says it is a difficult time for those wanting to get into the export side of the industry. "All of the markets are still in recession, prices are still depressed," he explains. However, if you are particularly keen to give it a try he recommends finding high quality products and advises you find importers you can do business with, as it is essential to have a partner you can trust.

Existing exporters

While government negotiations are crucial to the industry’s exporting success, Reid recommends developing commercial relationships to help support this. Negotiating on an industry-to-industry level can mean you have someone "pulling for you on the other end". They can then help lobby their governments to give your products priority and hopefully speed up the process. While fruit, vegetables and plants are the most prominent aspect of horticultural exports there are an increasing number of plant breeders who are successfully exporting their intellectual property. Doug Waterhouse, chief of Plant Breeders Rights at IP Australia cites the example of the Western Australian grower who bred the Pink Lady apple. The breeder registered the apple under the Plant Breeders Rights in countries around the world, so any growers who want to grow the variety need to buy a license. "Pink Lady is, or is about to become, the most popular apple in the world," Waterhouse says. "Every market that you see overseas has Pink Lady in it." Waterhouse believes there are a growing number of opportunities to sell intellectual property in markets around the world, but particularly in developing nations where they are still using varieties dating back decades instead of more cost effective modern varieties. Mark Lunghusen, managing director of Outback Plants and World Select Plants, says it is essential to know your market and be known in your market. Regularly visiting your business partners and the regions you want to sell into is essential to continued success and developing new international markets. It’s about building and maintaining relationships and ensuring you have a regular presence in the market, he says. If you become complacent, someone will quickly take advantage of you. Being unique is also an advantage, according to Summers. "You need to promote some kind of brand that your importers and other importers will recognise." Reliability, credibility and after sales support will go a long way to developing your reputation and help cement relationships.

Advanced exporters

When you are well established and well known in international markets you have a bit more clout. Lunghusen has a global reputation as a plant breeder, and says when you are a bigger player, people come to you. It means he is not solely driven by what the market wants but can influence what is introduced to the market. His company also represents other breeders, putting a product through his distribution system and taking it to the world. Lunghusen says regularly attending trade shows, networking and visiting clients is essential, even for those who are well-established exporters. Australians don’t generally have a good reputation for negotiating, and he advises some training in this area would be well served: "We have a very good reputation as horticulturalists and innovators but a poor reputation as negotiators." Reid’s years of success helping negotiate market access for Tasmanian growers has landed him in his role with the Office of Horticulture Market Access. He will be using his knowledge and experience to help horticulture growers from across the country develop and grow international markets.

Barriers

Like most Australian exporters, the tyranny of distance is a big issue for horticulturalists sending products overseas with increasing freight costs a barrier for many. In recent months the Australian dollar has exceeded US$0.90 and Summers says there are forecasts it could reach parity in 2010 and remain high for the next five to 10 years. "If that’s the case I think we’ll see the export industry sector restructuring," he says. High labour costs compound the high dollar value; Reid says Australia’s cost of production is higher than any other nation. Australian growers also don’t get the government incentives that US growers receive. New Zealand, South Africa and Chile have lower wages and a foreign exchange advantage. "We compete with the southern hemisphere producers for world markets," Reid says. "The only way we can export out of Australia with our high costs, are premium products. We have to always aim at the top end of the market." Newton agrees, and says most of our horticulture exports are premium products to niche markets such as cherries to Japan and citrus to the USA. "They are high volume, high end markets that are worth fighting for," she says. Market access is a continual issue and Newton says the loss of access to traditional markets like Taiwan and Hong Kong in recent years has had detrimental effects. While politics often plays a part, quarantine is another stickler for Australian producers. Exporters understand that pests and diseases should not be spread around the world, but have raised concerns that the playing field isn’t even. Some argue the tests are more stringent for produce going out than coming in. And the cost of tests here far exceeds those anywhere else in the world, placing further burden on exporters. Adding to the list of challenges is climate change. Increasing incidents of inclement weather, storms, hail, rising temperatures and water shortages all impact on the quality and quantity of produce.

The future

There are hurdles for horticultural exporters and many challenges to overcome in the face of political, economic and environmental turbulence, but for those with quality products and determination there are opportunities to be had. The emerging markets of India, Indonesia and China are seeing a resurgence of interest in Australian produce. Newton says these nations have a growing middle class looking for products they can’t buy at their local market. Summers says there are also a few exporters "playing roulette in the new Russian market". Many of the importers find they can’t get the foreign currency to pay for the produce once it arrives, a costly and frustrating exercise for our exporters. But he said there is potential for money to be made for those willing to take the risk. Climate change might also see a change in production techniques with the possibility of wind barriers and sunscreens around produce, although Newton admits this will come at considerable cost. The Office of Horticulture Market Access, which is still in its infancy, is expected to make inroads into new and existing markets. Reid says they will work on the three pillar approach Tasmania has been using for decades. This means addressing the science by ensuring all quarantine questions are answered, having the diplomatic and political relationships in place, and establishing commercial relationships. "In Tasmania we’ve successfully negotiated seven national market access activities in the last 10 years," he says. It is an achievement in an industry where it can take up to 20 years to obtain market access.

Trade links

Australian Horticultural Exporters Association: www.ahea.com.au Australian Quarantine and Inspection Service: www.daff.gov.au/aqis Biosecurity Australia: www.daff.gov.au/ba Horticulture Australia Council: www.hac.org.au Horticulture Australia (including Office of Horticulture Market Access): www.horticulture.com.au Plant Breeders Rights at IP Australia: www.ipaustralia.gov.au/pbr/index.shtml

CASE STUDY: Outback Plants

When Mark Lunghusen began his horticulture career he thought he would be involved in Australia’s standard nursery production industry. Instead Lunghusen, managing director of Outback Plants and World Select Plants based at Cranbourne in Victoria, has become a significant player in the international scene. For two decades his plant breeding companies, which breed new garden and ornamental plants, have steadily increased their export operations. They derive 99 percent of their income from export earnings and export to about 25 countries including much of Europe, as well as Brazil, Canada, Japan, Korea, South Africa and the USA. "We take out plant breeding rights on [the plants] around the world," Lunghusen says. "We actually export the intellectual property; we’re not physically exporting the plants." His dealings are predominantly with large propagation companies, who buy the rights to breed his stock. "We would license to a propagation company, for example in Europe, and they basically start the plant from a cutting." As with any export business, growing the export market has not been without its challenges. It is a competitive industry and Lunghusen’s business, which has a handful of staff, is a small player compared to the big international corporations overseas. He says vigilance is essential as there is always someone looking to reproduce what you are doing. It is necessary to be seen to enforce Plant Breeders Rights overseas and to know the competition. Understanding the market and how it varies from nation to nation, even within Europe, has helped his business thrive. His companies have about 800 varieties in trials around the world, of which about 75 are commercial.

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