Sheep farmers have revealed China is buying 78 per cent of the wool Australia produces, sparking warnings our primary producers are too reliant on the communist nation.
A parliament committee in Canberra is currently holding meetings to examine how Australia can diversify its trade networks.
Wool Producers Australia told the hearing on Tuesday that only two per cent of Australia’s fleece remains in the country, with China snapping up $3.2billion worth a year.
‘Many take the view that the Australian wool industry is over-reliant on China,’ the wool industry representative told the meeting.
Chinese President Xi Jinping previously praised Victoria in May for signing a trade agreement while simultaneously hitting Australian barley farmers with an 80 per cent tax
Sheep farmers has revealed China is buying 78 per cent of the wool Australia produces, sparking warnings our primary producers are too reliant on China
‘What must be appreciated is that the Australian wool industry’s relationship with the Chinese wool textile industry has been built and strengthened over several decades.’
The spokesperson explained wool exports were a successful example of how trade connections could be formed without government intervention but rather with direct negotiations supported by policies such as free trade agreements.
The huge demand for Australia’s high quality wool is fuelled by China’s increasingly affluent middle class, the spokesperson said.
‘We have witnessed increasing domestic consumption of wool garments and products within China and as this grows, so does the opportunity to sell more wool. ‘
The representative argued diversifying markets was important – but new markets would need the infrastructure required for processing and ability to afford the wool, which China already has.
In May, wool prices in Australia, the world’s dominant exporter, plunged more than 25% since early March after trade routes to Europe were abruptly cut amid the coronavirus pandemic, leaving Chinese wool mills in control over bidding.
The slowdown was so severe that wool auction houses across Australia cut the number of trading days after the usual demand from high-end European tailors dried up.
Wool broker David Hart, from Nutrien Ag Solutions, said that Chinese buyers were therefore able to control pricing.
In 2018-19, China bought more than 60 per cent of Australia’s barley exports, according to the Department of Agriculture
Also in May, China issued an 80 per cent tax on Australian barley being imported into the country.
The move was widely seen as payback for Australia’s push at the World Health Forum for an inquiry into COVID-19.
Farmer Brent Sheahan, who has a property on the Avoca River in northern Victoria was in the process of planting 1,200 hectares of barley when the tax hit.
‘Overnight, the price dropped $50 a tonne,’ he said.
Another farmer said they had lost $100,000 in potential profits in 24 hours.
In 2018-19, China bought more than 60 per cent of Australia’s barley exports, according to the Department of Agriculture.
At about 2.5million tonnes that amount more than triples the next highest market of Japan which is closely followed by Thailand and Vietnam.
While the tariff has been seen as a warning to Australia over calls for an international inquiry into the coronavirus pandemic, China has said it is because of Australia’s unfair trade practices.
Particularly a tariff Australia imposed on Chinese steel imports.