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Summary of full report
by Barry Lee
April 2005
RIRDC Publication No 05/037 RIRDC Project No. CON-7J
Executive Summary
Existing Asian vegetable exports from Australia have been dominated by Chinese Cabbage from Brisbane and Perth, and to a lesser amount from Sydney and Melbourne. However industry and Government organisations in the NT have reported recent market interest from Singapore especially for leafy Asian vegetables and tropical Asian gourds due to the proximity of the NT growers and the potential quality of Asian vegetables.
In 2003, RIRDC commissioned an update of the Australian Asian vegetables industry situation. The study found that:
This study shows that exports to Singapore by sea from Darwin are commercially viable for a selected number of vegetables. While many of the other vegetables are not commercially viable, the selected vegetables provide Singapore with an alternative source of supply.
Exports of Asian vegetables from NT need to be price competitive, however the exports can provide further advantages for Singapore by offering ‘Least Cost and Best Value’ Asian vegetables. Darwin is able to provide Singapore with a future base from which to grow export volumes through the development of consolidated supply strategies from other Australian growing areas.
The Singapore Market
Singapore’s import trade
statistics show that the overall imported vegetables market had a wholesale
market value of AS290 million in 2003. Industry sources in Singapore estimate
that Asian vegetables account for 60% of the market on a volume basis,
and China represents some 30% of the volume of supply. On this basis, the
Asian vegetables market in 2003 was approximately 80,000 tonnes with China
supplying some 25,000 tonnes.
Key Findings
Finding 1 – Three Asian
Vegetables Are Commercially Competitive
Three vegetables, namely
Kai laan (Brassica alboglabra), Chinese Spinach (Spinacia oleracea)
and Chinese Mustard (Brassica juncea), are competitive with exports
from China when exported by sea to Singapore.
Finding 2 – Exports By
Sea Are More Cost Competitive Than By Air
On a unit cost basis, exports
by sea appear to be more cost effective than by air. Transport costs by
sea are estimated to range between $0.66/kg - $0.88/kg compared to $1.27/kg
- $1.64/kg by air.
Finding 3 – Most Of The
Other Asian Vegetables Do Not Appear To Be Competitive For Export
Clearly 9 of the 12 vegetables
do not appear to be commercially viable for export by sea or air.
The Singapore market C&F prices are less than the cost to export from Darwin and in many cases the prices offered by the Australian southern states exceed the C&F prices in Singapore.
Finding 4 – The Current
Range of NT Vegetables are Grown for the Australian Market
The ‘top 5’ major vegetables
grown in the NT are okra, bitter melon, snake beans, gourds and kang kong.
The demand for these vegetables is largely driven by the Australian southern
States as the majority of these vegetables are exported to these markets.
These ‘top 5’ vegetables however, are not in demand by consumers in Singapore.
Finding 5 – Potentially
Sufficient Production Capacity to Supply Exports
The export demand from Singapore
would be within the current production capacity of the NT industry. Production
however would be seasonal and would occur only in the drier season of March
to September.
Finding 6 – Limited ‘Type
2’ Growers to Supply Exports To Singapore
Asian vegetable growers
who are predominantly ‘market gardeners’ may be defined as Type 1 growers,
whereas larger scale producers may be defined as Type 2 growers. As with
all other States, Type 1 growers are the major group by number in the NT,
but the smaller number of Type 2 growers are becoming responsible for the
major volumes and growth in the industry. This growth has been directed
towards the southern States and this study did not identify any growers
who currently export Asian vegetables from Darwin to Singapore.
Finding 7 - Identification
of New Potential Asian Vegetable Opportunities
During the market research,
other potential vegetable opportunities were identified including Japanese
‘Kyuri’ cucumber and organic Asian vegetables.
Export Value Factors
The market research identified
that the Singapore market for Asian vegetables is largely driven by price.
This is especially the situation in the wholesale markets and has been
exacerbated by the competitive market conditions and recent increase in
supply through imports from China. Such imports have ensured aggressive
competition between suppliers to Singapore.
However, a number of other factors were identified which provide significant value for retailers in Singapore. These value factors include:
Value Factor 1 – Quality,
Food Safety and Chicken Flu
Assurance of the quality
and safety of vegetables is a fundamental requirement, and is usually a
prequalification for supply. Supply of vegetables should be sourced from
farms that comply with a standard of agricultural production known as Good
Agricultural Practice (GAP). This is important especially to ensure that
agricultural chemical inputs are minimized, and pesticide and residue levels
(or maximum residue levels) do not exceed industry and/or health guidelines.
The recent widespread and protracted occurrence of Highly Pathogenic Avian Influenza (HPAI) or chicken flu in Asia has become a cause of concern for world health authorities. World health authorities consider that all infected poultry and associated feed, cages and faeces are high risk viral materials. For farms growing Asian vegetables, the use of high risk materials such as chicken faeces for vegetable fertilizer, would be considered an unsafe agricultural practice in HPAI infected areas.
Internationally, Australia has a reputation for a high level of quality assurance in its agricultural production systems. These systems ensure the integrity of Asian vegetables from Australia is not compromised by pesticides, residues or biosecurity issues. In particular, Australia is free from HPAI and would be able to assure Singapore of the integrity of Asian vegetables from Australia.
Value Factor 2 - Commitment
to Supply Volumes
Retailers noted a requirement
for the availability and continuity of both supply and volume from Australian
exporters. Retailers commented upon their perceptions that many Australian
exporters did not appear to be committed to supplying the Singapore market.
Retailers noted that they preferred to source from long-term and committed
suppliers rather than ‘spot-market’ suppliers where volumes and quality
may not be assured. Such an approach is able to provide benefits of consistency
of supply, quality and pricing to retailers.
Value Factor 3 - Product
Range
Retailers expressed a desire
to source a broad range of products from supplier if practical. This is
cost effective from both a retailer and supplier perspective especially
as it supports volume and reduces overhead unit costs.
Value Factor 4 - Supply
Chain Management
From the market’s perspective,
an understanding and experience with supply chain, inventory and category
management issues shall enable NT exporters to better service the market
needs. From an exporter’s perspective, sea freight exports are more economical
than air freight exports. The shipping schedules and sailing time of 6-7
days to Singapore may test the suitability of some highly perishable, short
shelf-life Asian vegetables compared to the same day delivery of exports
by air. A focus needs to be upon longer shelf-life vegetables and the operation
of an efficient supply chain before and after the point of delivery and
sale.
Value Factor 5 – Market
Knowledge and Marketing Support
Significant value was placed
upon the support of suppliers who invested in understanding the Singapore
market and provided marketing support to increase sales for retailers.
Marketing support by suppliers to support sales growth for retailers, not
only secured sales for retailers, but also secured sales and market knowledge
for the suppliers. Knowledge of the market shall ensure that exporters
are achieving the best returns from their sales and not underselling themselves
through a lack of understanding of the market.
Value Factor 6 – Relationships
Relationships underpin commercial
trade. Retailers noted that it was important for suppliers to not only
understand their needs, but to also understand the market in terms of consumer
issues and competition. In markets such as Singapore, competitive pressures
may result in the need for frank and robust discussions at various times.
A strong relationship and a culture of partnering shall underwrite these
commercial pressures and should translate into a competitive advantage
for Australian suppliers.
The Competitive Advantages for Singapore
Specific export strategies should be developed in the following areas:
- Market Knowledge
Quality assurance based upon Australia’s ‘world-class’ farm to plate management systems.- Develop groups of Type 2 growers in the NT and visit the Singapore market to build relationships and gain an understanding of buyer and market requirements.
- Develop a detailed understanding of the Singapore Government’s position and strategic approach to the biosecurity threat of HPAI to Asian vegetable supplies.
- Conduct research of market competition provided by China in Singapore.
- Marketing Support
- Use consumer research to confirm vegetable types and specifications for vegetable exports and develop Asian vegetable promotion strategies with customers.
- Improve market efficiency and transparency through the provision of timely Asian vegetable market data from Australia and the development of grower production and marketing strategies.
- Supply Chain Management
Formulate strategies to encourage a ‘through chain’ approach to exporting and identify ‘weak spots’ where costs can be eliminated.- In conjunction with customers, integrate demand and supply programs with supply chain strategies to achieve least cost and best value exports.
Develop technical partnerships between customers and Type 2 growers in the NT for research support in areas of:
Extension of shelf-life for Asian vegetables.
Integrated codes of practice for food safety, biosecurity, packaging, cool chain management and handling protocols.
Liaise with industry groups in South Australia and Western Australia to assess and plan the development of a consolidated supply strategy through Darwin.
- Value Adding and New Product Development
In association with customers, develop value-adding strategies which shall either improve quality or reduce costs of vegetable exports or improve sales by the development of new products.
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