Key point:

· Wheat leads 20% increase in agricultural exports to China

· Agricultural exports to China hit record high, says Village Bank

· China has overtaken Indonesia as Australia's biggest wheat export customer

Australia's agricultural exports to China have jumped more than 20% to a record high of A$16.6 billion, a new report shows the industry has no intention of diversifying away from its largest and most profitable customer.

The record exports are unusual given that some major agricultural products are already subject to tough tariffs by China.

Barley recently had its trade ban lifted, while Australian wine, some seafood products and hay still face high tariffs and a Chinese trade ban.

A new report released by Country Bank using Global Trade Atlas data for the year ending June 30, 2023, shows that China is by far the largest market for Australian agriculture.

This is two and a half times higher than the value of agricultural products purchased from Australia by the second largest customers, Japan ($6.39 billion) and the United States ($5.63 billion).

This is good news for Australian farmers, with the value of farm exports at a record high.

Exports were almost 50 percent above the five-year average, totaling almost $80 billion, an increase of $12.5 billion on the previous year and building on the $18 billion increase in the 2021-22 financial year.

The Rural Bank said the record was the result of last year's bumper grain harvest, with $31 billion worth of grain sold overseas, combined with higher prices for some commodities.

Victoria retained its position as Australia's largest agricultural exporter in the 2022 financial year, with exports increasing by $1.3 billion to a record $18.7 billion, while WA jumped to second place, up 33% to a record $16.2 billion. Grain production was at an all-time high.

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Wheat exports soar

The growth in exports to China was largely driven by a 66% or $1.5 billion increase in wheat exports; beef, almond and cotton exports to Asian countries also increased.

"For the second year in a row, China was the largest growth market in dollar terms," said Andrew Smith, head of agribusiness development at Rural Bank.

However, Mr. Smith said China's share of Australia's total agricultural exports had slipped to 20 per cent.

"That's the same as in 2019 when about 29% of our exports went to China.

"So obviously we have to diversify."

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China becomes top wheat exporter during barley trade closure

China's demand for Australian wheat surged in 2022-23, overtaking longtime top buyer Indonesia to become Australia's biggest customer.

China bought a record 6.4 million tons of Australian wheat in the October 2022-September 2023 marketing year, according to Lachstock Consulting.

It was followed by Indonesia with 3.49 million tons; Vietnam, with 2.38 million tons; South Korea, with 2.26 million tons; and the Philippines with 2.22 million tons.

Lachstock Consulting grains analyst Nick Carracher said it was a huge leap for China, which bought "just over a million tons" of Australian wheat in 2019-20.

Mr Carracher said while Indonesia had been buying high quality milling wheat, China was buying lower quality "downgraded wheat", which had been common in the last two seasons after the Australian summer harvest.

Mr Carracher believes Indonesia's share of exports will continue to fall to less than 3 million tonnes this year as it increases its purchases of Russian wheat.

"Since 2008, Indonesia's imports of Australian wheat have rarely been less than 3 million tons," Mr. Karacher said.

"Despite the conflict in Ukraine, Russia is still exporting record volumes every month.

"While there are some limitations on the way to get (Russian) grain, if it's cheap, Asian consumers will find a way to buy it.

"I think right now, China is definitely a major exporter to Australia," he said.

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Barley trade returns

China's rise to become Australia's number one wheat exporter has surprisingly occurred in the context of the halting of barley trade following the imposition of high tariffs on Australian grain.

However, since China announced last month that it was easing tariffs on Australian barley, trade has come back to life.

Rural Bank's Mr. Smith said there were reports that 300,000 tonnes of barley cargoes were currently en route from Western Australia to China.

Carracher said while the dealings with China were not fully transparent, trade estimates suggested about one million tons of barley had been sold to the northeast Asian country last year and still being grown.

"We don't have a complete picture of who did what. It's a bit of a guessing game," he said.

"But the general consensus is that more than a million tons of old and new crop has been produced."

Australian farmers are set to make a killing. A trade recovery has boosted prices for old-crop feed barley in Western Australia to about $100 a tonne to about $380 a tonne, and to about $60 a tonne in other barley-growing states such as South Australia and Victoria.

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