Volatility in Australian Agricultural Export Market: An Economic Analysis

This paper analyzes the volatility in the Australian agricultural export market and its impact on the local agricultural companies. It also discusses the economic analysis of the sector and provides recommendations for the government and firms in the industry.

ECONOMIC ASSIGNMENT

Table of contents
Introduction................................................................................................................................3
Evaluation of the topic...............................................................................................................3
The essence of the topic.............................................................................................................3
The economic analysis...............................................................................................................3
Views and recommendation.......................................................................................................5
Conclusion..................................................................................................................................5
Reference....................................................................................................................................6

Introduction
Agriculture and farming have been the backbone of any economy in the world. This
has also been the case with Australian economy as well. The country introduced the first
green revolution in the year 1960 and since then it has experienced high growth and returns
from this sector. The innovation in technology also has given the sector the boost to be one of
the most important agricultural exporters in the world. Notably, the production of the
agricultural sector of the country has increased from 1.84 billion tonnes in the year 1975 to
4.89 billion tonnes in the year 2007. Despite the growth and the sophistication of the industry,
the external changes in the market of export have created a problem for the Australian
agricultural sector from time and again.
Evaluation of the topic
The essence of the topic
This issue of volatility in the export market of agricultural goods had impacted the
local agricultural companies of Australia. According to Hunt et al. (2014), the changes in the
technology and systems are very dynamic in the export market which created a problem for
the exporters in the initial years. The absence of quick adaptation and modification following
the market trends often reduced the credibility of the agricultural firms of the country.
However, over the time the agriculture industry of the country has become more flexible.
Kirkegaard et al. (2014) noted that the workers working at any stage and any role in the
industry are more flexible than before. Technological advancement and changes are accepted
skilfully modifying the internal systems adroitly. Therefore the issue is related to the workers
and the owners of firm in agriculture industry of Australia. This is an issue for them as due to
the increase in competitiveness of the export market, lack of adaptation to changes may harm
the market performance of the exporters and hence the agriculture industry of Australia as a
whole.
The economic analysis
The agricultural sector has come up with new production apart from the niche
products which has given the industry further competitiveness in order to combat other
agricultural forces of the world such as the USA. Lyons and Lawrence (2017) highlighted
that the huge growth of the agricultural sector in the country and in the export market, is the
result of increased adaptability of the sector along with the introduction of new products in
the market.
In addition to that, another factor that hindered the growth of the Australian
agricultural market is the high labour cost and the low innovation from the industry of the

country. This can be supported by the theories of economics as well. The trade theories state
that comparative advantage in the market over the other country allows them to produce a
good or service (Potter and Tilzey, 2016). Therefore, with the new products, the Australian
agricultural industry has a comparative advantage over the other countries in the export
market. These have also allowed the industry to experience growth since the last decade.
Apart from that, the industry of Australia also started using satellite-based data along with the
ground data in order to produce the optimum amount of products in a given year. This has
resulted in huge amount of reducing in the cost of farming leading to the changes in prices.
As per the theories of demand and supply of economics, this reduction in the price of
Australian agricultural products has allowed the industry to grow in the export market. Sippel
(2015) highlighted that since the last decade the agricultural industry of the country went
more sophisticated than the other countries of the export market. The use of advanced
engineering and biology in the productions of the sector helped the agricultural firms of the
country to have a better and strong export demand.
Figure 1: The agricultural export performance of Australia
(Source: Fleming and Measham, 2015)
The emphasis on the specialised skills also has explained the growth in the
performance of the Australian agricultural industry. The theories of production in the
economic literature states that given the fixed amount of capital a rise in the productivity of
the labours result in the increased production (Jarrett and Anderson, 2017). In the case of
Australian agricultural sector, extensive use of technology and the new productions have
increased the productivity of the labours of the sector leading to an increased production in
the market.

Views and recommendation
However, based on the finding of the characteristics of the agriculture industry of
Australia, it is recommended to the government to intervene in the market. With the growth
in the agriculture industry of the country and increased demand in the export market, the
government needs to make sure that labours of the sectors are not exploited. The labour
exploitation in the sector may result not only in the human rights violation but it also can
reduce the future productivity of the labours of the industry. Given the future plans of the
industry to expand more in the export market, the reduced labour productivity can be fatal
and therefore an intervention from the side of the government is important.
Apart from that, the recommendation is also given to the firms in the agricultural
sector of Australia regarding the use of technology in determining the needs of the market.
The higher dependence on the technology and less importance on customer study can lead to
information gap in the market. This may also create a problem for the agricultural exporters
of Australia in the long run. Therefore it is important for them to move to a customer study
platform rather than using technology to detect the demand of the market. Furthermore, it is
also important for the firm owners to take care of the productivity of the labours given the
fixed wages as it will drive the industry forward. As discussed in the study the corresponding
low productivity to the high wages of the agricultural labours can reduce curb the growth of
the industry.
Conclusion
Therefore, the agriculture industry of Australia has grown in the export market due to
a number of reasons. The lack of new products in the market failed to provide comparative
advantage to the industry and hence the performance of the industry in the export market was
low. However, with the development of the niche skills and the increase in the adaptation of
the workers of the sector has lead to the growth of the industry. The increased sophistication
in the sector has also resulted in the accuracy as well. However, the paper presents
recommendation that increased decadency on technology may lead to ambiguity in the future.

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