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Growing tree nuts in Australia
Tree nuts provide attractive alternative production options to the more traditional but largely low value Australian agricultural industries which are currently under pressure from the low labour costs, and heavily subsidised production of overseas competitors.
Nuts return a gross revenue of $20,000-$30,000/hectare; compared to a $500 - $700/ha return from grains. Nuts return $2,000 - $3,000 per megalitre of water applied; in contrast, rice returns several hundred dollars per megalitre
The tyranny of distance generally means that most agricultural commodities carry a high export freight cost to our major markets. By contrast, the high value of nuts compared to most broadacre crops means the freight cost is an insignificant component. For example, a 20-foot container of almonds or macadamias has a market value in excess of $150,000 compared to around $5,000 for a container-load of wheat. Freight costs per kg are comparable but as a proportion of value there is a stark difference.
Australia enjoys a reputation in consuming countries for unsurpassed food-safety and environmental standards (clean and green). Our relative isolation has generally provided Australian agriculture with a pest- and disease-free environment. The Australian nut industries have a long history of participation in government-sponsored residue testing, with an exemplary track record measured against some of the strictest residue limits in the world, providing global markets with justifiable confidence in the Australian product.
Tree nut industries require long-term development capital, technological skills and research to build on advantages. With the support of research and development funding from the Australian Government, Australia is producing some of the highest nut yields per hectare in the world in particular for almonds, pecans and macadamias. Long-term breeding programs aimed at improved varieties are also in progress.
From paddock to processing, the Australian industry has excelled at producing a wide and growing range of tree nut crops. Underpinning this success are several factors including the variety of climatic and agronomic zones, excellent infrastructure and processing systems, investment in research and development, and skilled growers and advisors.
Australian tree nut production
Capital and expertise have combined to rapidly expand the area under nut cultivation in Australia. The industry is a mixture of large ‘corporate’ farms and medium- and small-sized family farms.
Nut growing converts land from broadacre crops with relatively low financial returns per hectare to intensive crops with a high return per hectare of land and per megalitre of water applied.
For example, nuts return a gross revenue of $20,000-$30,000/hectare; grain returns $500-$700 gross per hectare; Nuts return $2,000 to $3,000 per megaltre of water applied; in contrast, rice returns several hundred dollars per megalitre.
Tree nut production in Australia is dominated in scale by almonds and macadamias, with the former representing more than 50% of the total area planted and the tonnage produced. The macadamia, Australia’s iconic native species, accounts for approximately 30% of area planted and tonnage produced.
Current Australian nut production had a farm gate value of almost $1 billion from the 2015-16 season. This represents a 250% increase over the last five years. Overall, the farm-gate value of Australian tree nuts is forecast to increase by a further 50% by 2025.
The Australian tree nut industries show a comparative advantage over competitors in a number of areas. Depending on the nut industry, advantages may take the form of lower per unit production costs, higher yields and a ‘country of origin’ gene pool. This allows Australia to compete (in both production and processing) with countries that have lower labour costs. In addition, Australian tree nut production generally reflects a high level of supply complementarity into key importing markets, thanks to advantageous supply windows and enhanced quality.
The major producers against whom Australia must compete are:
Almonds: USA and Spain
Pecans: USA, Mexico and South Africa
Macadamias: USA (Hawaii), South Africa, Kenya, Guatemala
Pistachios: USA, Iran, Turkey
Walnuts: USA, China, Chile, Eastern Europe
In all cases, Australia is a powerful competitor based on cost or quality, or both.
Underlying world demand
World demand for nuts is growing at about 4% a year, well above natural population growth. This expansion is coming from an increasing awareness of the health benefits of nuts and an increasing prosperity in developing economies.
Developing economies, such as India, China, Eastern Europe and the Middle East, are all showing strong, growing demand for tree nuts. As disposable incomes rise, consumption of traditionally expensive foods increases. Nuts are not luxury foods (they are priced at similar levels to medium cuts of beef), but they traditionally have been beyond the pockets of the poor.
The evidence suggests that as economic growth and incomes increase in developing countries, so will their demand for nuts.
Australian nut consumption
Australian nut consumption is growing at a rate above the world consumption demand, at 5-6% year on year. The Australian nut crop is heavily consumed in local markets and any shortfall between domestic demand and available supply is met by imports. The almond, macadamia, walnut and pecan industries have all been developed with a strong international focus and are increasingly exported as production grows.
In 2015-2016 domestic nut consumption was approximately 60,000 tonnes. This values the industry on current trade prices in excess of $740 million, split almost equally between domestic and imported product. This trade price equates to an estimated retail value of $1.5 billion.
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