Virus will impact global agricultural trade

The International Monetary Fund has forecast a three per cent contraction in global economic activity in 2020, worse than the global financial crisis.

However, Australian Bureau of Agricultural and Resource Economics and Sciences acting executive director Peter Gooday said because agricultural exports principally relate to food, trade would continue.

“The key impact on global agricultural markets is likely to be softer prices from falling incomes and changes in where food is consumed rather than significantly reduced consumption for most products,” Mr Gooday said.

“In the early days of the virus, Australian agriculture’s exposure to China was a risk.

“The most exposed products were those typically associated with restaurants and cafés, and those feeding into manufacturing processes.

“We saw a drop in seafood exports but many other exports continued.

“China’s success in controlling the spread of the virus has allowed it to loosen restrictions and put its economy on a path to recovery.

“Provided the recovery is sustained, the negative impacts on Australia's trade with China may be limited.”

Mr Gooday said in the immediate future, supply chain and logistics disruptions would create the most significant risk to the sector and producer incomes.

“The government has taken a number of steps to keep agriculture producing and our food and fibre reaching export markets, significantly reducing these risks,” Mr Gooday said.

International trade policy responses to COVID-19 have been concentrated around restricting wheat and rice trade.

However, this is expected to have limited impacts on Australian producers and consumers.

“Global stocks of major grains are currently very high, the outlook for global production is good, and the current restrictions are not expected to affect global markets significantly,” Mr Gooday said.

“Despite the pandemic, it is the recent difficult seasonal conditions in Australia that will continue to dominate industry fortunes over the short term.

“While recent improvements in seasonal conditions will ease pressures on primary producers, the effects of COVID-19 compound the impacts on the sector from drought and this summer's bushfires.”