Required Report - Public distribution

**Date:** 11/21/2007

**GAIN Report Number:** AS7068

AS7068

**Australia**

**Fresh Deciduous Fruit**

**Annual**

**2007**

**Approved by:**

![](media/image1.wmf)Kathleen Wainio, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Michael Darby, Agricultural Specialist

**Report Highlights:**

The continued drought in Australia has affected apple and pear
production, although both are projected to increase slightly in 2008,
assuming normal weather. Exports have been held in check by reduced
production and the strong Australian dollar; however the projected
increase in 2008 production should see higher exports. New Zealand has
requested WTO consultations with Australia concerning the measures
imposed by Australia on the importation of apples from New Zealand.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Canberra \[AS1\]

\[AS\]

Table of Contents

[SECTION ONE: SITUATION AND OUTLOOK
3](#section-one-situation-and-outlook)

[Summary 3](#summary-1)

[SECTION TWO: STATISTICAL TABLES 4](#section-two-statistical-tables)

[SECTION THREE: NARRATIVE ON SUPPLY AND DEMAND, POLICY & MARKETING
6](#section-three-narrative-on-supply-and-demand-policy-marketing)

[Apples 6](#apples)

[Production 6](#production)

[Exports 6](#exports)

[Policy 7](#policy)

[Pears 8](#pears)

[Production 8](#production-1)

[Imports 8](#imports)

[Exports 9](#exports-1)

# SECTION ONE: SITUATION AND OUTLOOK

## Summary {#summary-1}

At time of writing this report, the long-running and severe drought
which began in 2002, continues to constrain production of apples and
pears to historically low levels. Despite recent rainfall, irrigation
water reserves remain critically low, and growers have struggled to
maintain production with dwindling water supplies. This, combined with
poor soil moisture, has reduced expectations for the production of
Australia pears and apples in CY 2008, although both are expected to
increase slightly over previous year levels.

A succession of drought years has seen irrigation water reserves reduced
on a year-by-year basis. Post anticipates that these reserves will
require a period of above average rainfall to replenish and irrigation
water supplies to return to levels reflective of the longer term average
before the end of CY 2008.

Historical data show exports of Australian apples and pears to be
declining since the beginning of the drought in 2002. Furthermore, a
strengthening Australian dollar and strong domestic economy have also
combined to keep exports at lower levels.

Export data indicate a general decline in exports. For apples, all
markets have declined with the exception of the UK. For pears, all
markets have declined with exception of Canada and New Zealand.

Post has assumed average rainfall in the lead-up to and during CY 2008.
Post has forecast a modest increase in production of both apples and
pears which will likely be driven from a higher yield, as no increase in
tree numbers is foreseen. Exports are also forecast to increase although
they are not expected to return to pre-drought levels.

# SECTION TWO: STATISTICAL TABLES

  ---------------- ------------ ------------- ------------- ------------ -------------- ------------- ------------ -------------- ------------- -----------
  **PSD Table**                                                                                                                                 

  Apples, Fresh                                                                                                                                 

                   **2005**     **Revised**                 **2006**     **Estimate**                 **2007**     **Forecast**                 *UOM*

                   **USDA\      **Post\       **Post\       **USDA\      **Post\        **Post\       **USDA\      **Post\        **Post\       
                   Official**   Estimate**    Estimate\     Official**   Estimate**     Estimate\     Official**   Estimate**     Estimate\     
                                              New**                                     New**                                     New**         

  **Market Year                 **01/2006**   **01/2006**                **01/2007**    **01/2007**                **01/2008**    **01/2008**   *MM/YYYY*
  Begin**                                                                                                                                       

  **Area Planted** 20000        20000         20000         20000        20000          20000         0            20000          20000         *(HA)*

  **Area           0            0             0             0            0              0             0            0              0             *(HA)*
  Harvested**                                                                                                                                   

  **Bearing        9450         9450          9450          9450         9450           8900          0            8900           8950          *(1000
  Trees**                                                                                                                                       TREES)*

  **Non-Bearing    1650         1650          1650          1650         1650           1300          0            1300           1350          *(1000
  Trees**                                                                                                                                       TREES)*

  **Total Trees**  11100        11100         11100         11100        11100          10200         0            10200          10300         *(1000
                                                                                                                                                TREES)*

  **Commercial     255000       255000        276500        205000       276500         265000        0            265000         275000        *(MT)*
  Production**                                                                                                                                  

  **Non-Comm.      0            0             0             0            0              0             0            0              0             *(MT)*
  Production**                                                                                                                                  

  **Production**   255000       255000        276500        205000       276500         265000        0            265000         275000        *(MT)*

  **Imports**      0            0             0             0            0              0             0            0              0             *(MT)*

  **Total Supply** 255000       255000        276500        205000       276500         265000        0            265000         275000        *(MT)*

  **Fresh Dom.     131500       131500        145000        105000       145000         135000        0            135000         145000        *(MT)*
  Consumption**                                                                                                                                 

  **Exports,       8500         8500          7000          7000         7000           6150          0            6150           6500          *(MT)*
  Fresh**                                                                                                                                       

  **For            115000       115000        124500        93000        124500         123850        0            123850         123500        *(MT)*
  Processing**                                                                                                                                  

  **Withdrawal     0            0             0             0            0              0             0            0              0             *(MT)*
  From Market**                                                                                                                                 

  **Total          255000       255000        276500        205000       276500         265000        0            265000         275000        *(MT)*
  Distribution**                                                                                                                                
  ---------------- ------------ ------------- ------------- ------------ -------------- ------------- ------------ -------------- ------------- -----------

# 

#  

  ---------------- ------------ ------------- ------------- ------------ -------------- ------------- ------------ -------------- ------------- -----------
  **PSD Table**                                                                                                                                 

  Pears, Fresh                                                                                                                                  

                   **2005**     **Revised**                 **2006**     **Estimate**                 **2007**     **Forecast**                 *UOM*

                   **USDA\      **Post\       **Post\       **USDA\      **Post\        **Post\       **USDA\      **Post\        **Post\       
                   Official**   Estimate**    Estimate\     Official**   Estimate**     Estimate\     Official**   Estimate**     Estimate\     
                                              New**                                     New**                                     New**         

  **Market Year                 **01/2006**   **01/2006**                **01/2007**    **01/2007**                **01/2008**    **01/2008**   *MM/YYYY*
  Begin**                                                                                                                                       

  **Area Planted** 6850         6850          6825          6825         6825           6800          0            6800           6775          *(HA)*

  **Area           1055         1055          1050          1050         1050           1050          0            1050           1050          *(HA)*
  Harvested**                                                                                                                                   

  **Bearing        1808         1808          1808          1808         1808           1700          0            1700           1700          *(1000
  Trees**                                                                                                                                       TREES)*

  **Non-Bearing    322          322           322           322          322            250           0            250            250           *(1000
  Trees**                                                                                                                                       TREES)*

  **Total Trees**  2130         2130          2130          2130         2130           1950          0            1950           1950          *(1000
                                                                                                                                                TREES)*

  **Commercial     151000       151000        142500        120000       142500         145000        0            145000         150000        *(MT)*
  Production**                                                                                                                                  

  **Non-Comm.      0            0             0             0            0              0             0            0              0             *(MT)*
  Production**                                                                                                                                  

  **Production**   151000       151000        142500        120000       142500         145000        0            145000         150000        *(MT)*

  **Imports**      4000         4000          3368          4800         3368           3900          0            3900           4400          *(MT)*

  **Total Supply** 155000       155000        145868        124800       145868         148900        0            148900         154400        *(MT)*

  **Fresh Dom.     80000        80000         79000         64800        79000          85500         0            85500          92150         *(MT)*
  Consumption**                                                                                                                                 

  **Exports,       7000         7000          6914          5600         6914           5900          0            5900           6750          *(MT)*
  Fresh**                                                                                                                                       

  **For            68000        68000         59954         54400        59954          57500         0            57500          55500         *(MT)*
  Processing**                                                                                                                                  

  **Withdrawal     0            0             0             0            0              0             0            0              0             *(MT)*
  From Market**                                                                                                                                 

  **Total          155000       155000        145868        124800       145868         148900        0            148900         154400        *(MT)*
  Distribution**                                                                                                                                
  ---------------- ------------ ------------- ------------- ------------ -------------- ------------- ------------ -------------- ------------- -----------

#  SECTION THREE: NARRATIVE ON SUPPLY AND DEMAND, POLICY & MARKETING

## Apples

### Production

Apple production for CY 2008 is forecast to increase slightly to 275,000
MT. Despite this increase, this level remains well below the historical
average. Continued irrigation water shortages combined with an overall
decline in tree numbers will likely constrain production of apples in CY
2008 despite an assumed return to more normal weather conditions.

Industry sources report "patchy" production under the current drought
conditions, ranging from average to below average. Some areas have
suffered frost damage while others are struggling to secure enough
irrigation water. Surprisingly, while tree removal has been significant,
it does not seem to have had a major impact on production (as has been
the case with pear and citrus production). Industry sources suggest that
this is due to the removal of older and less productive trees.

Industry sources report a degree of resilience to drought conditions
among apple producers. The adoption of water-saving techniques combined
with a greater knowledge of drought management has seen production
exceed expectations in some areas. Industry sources also report that the
apple industry is relatively well placed to purchase irrigation water
(above their allocated entitlement); post expects that this is due to
the intensive nature of apple production compared with broad acre
industries that require irrigation.

![](media/image2.wmf){width="6.001388888888889in"
height="2.011111111111111in"}

*Source: ABARE/DAFF Data*

Varieties

A handful of varieties currently dominate Australian apple production
according to a report recently published by industry groups. Pink Lady
(22 percent), Gala (18 percent) and Red Delicious (14 percent) account
for over half of Australia's apple production. Pink Lady and Gala
account for nearly half of all new plantings while the older Granny
Smith varieties account for just under 20 percent. Red Delicious

accounts for the majority of exports, primarily from Tasmania.

### Exports

Apple exports are forecast at 6,500 MT in CY 2008. This represents an
increase from the previous year and is commensurate with the increase in
production forecast for CY 2008.

Post advises that apple exports have diminished greatly since 2002/03.
The onset of drought, relatively strong growth in the domestic economy
and the more recent strengthening in the value of the Australian dollar
has seen the export market diminishing in significance.

![](media/image3.wmf){width="6.000694444444444in"
height="2.0118055555555556in"}

*Source: ABARE and DAFF Data*

Trade data for individual market performance shows export volumes to
most markets declining in line with the total decline. Exports to the
UK, however appear to be moving against the declining trend with an
absolute increase achieved over the past two seasons. Industry sources
suggest that this increase is due to the demand for the "Pink Lady"
variety. Production of this variety has increased sharply in recent
times and industry sources suggest that this now accounts for over 20
percent of the national crop. Post expects pink lady production will
continue to expand despite constrained total production.

![](media/image4.wmf){width="5.997916666666667in"
height="2.178472222222222in"}

*Source: World Trade Atlas*

### Policy

Biosecurity Australia in March 2007 released the final Import Risk
Analysis Report (IRA) for Apples from New Zealand. The report recommends
permitting the importation of apples from New Zealand to Australia
(except for Western Australia), subject to the following stringent
quarantine risk management conditions:

-   mandatory pre-clearance and auditing arrangements in New Zealand
    involving Australian Quarantine and Inspection Service (AQIS)
    officers

-   freedom from fire blight symptoms - inspection of orchards for any
    visible fire blight symptoms

-   use of disinfection treatment (e.g. chlorine) in packing houses to
    prevent contamination of apples with fire blight bacteria

-   freedom from European canker disease - inspection of orchards during
    autumn or winter after leaf fall

-   freedom from apple leaf curling midge - inspection in New Zealand of
    a random sample of 3,000 fruit in each export lot

-   inspection for all other quarantine pests, with remedial action.

In June 2007 the Federal Government' Senate Regional and Rural Affairs
Committee completed an inquiry into the decision made by Biosecurity
Australia to allow apple imports from New Zealand. The Committee stated
that it remains to be convinced that the risk of establishment of
disease after the importation of contaminated fruit was low to very low
and has asked for a draft of the standard operating procedures currently
being developed as well as details of the scientific evidence and
modeling undertaken as part of the IRA process. The Committee has also
stated that imports of apples from NZ should not commence before the
Committee has completed its consideration of the matter. (For further
information, see GAIN Report AS 7039)

On August 31, 2007 New Zealand requested consultations with Australia
pursuant to Article XXII of the General Agreement on Tariffs and Trade
1994, Article 4 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU), and Article 11 of the Agreement on the
Application of Sanitary and Phytosanitary Measures (SPS Agreement),
concerning the measures imposed by Australia on the importation of
apples from New Zealand.

## Pears

### Production

Pear production is forecast at 150,000 MT in CY 2008 representing a
modest increase on the previous year. Post has assumed a return to
average weather conditions in the lead-up to, and during, CY 2008 and
subsequently expects yield to increase.

Dry conditions, combined with a lack of irrigation water have seen the
number of trees decline as producers remove older and less productive
varieties. Industry sources report that some of the older canning
varieties have been removed in areas where irrigation water is no longer
available.

Industry sources suggest that once the drought breaks and irrigation
allocations return to levels more reflective of the long term average,
that production of about the levels prior to the 2002/03 drought could
be achieved. Post however believes that the productive capacity of the
industry has been reduced for the foreseeable future due to a reduction
of existing trees and new plantings.

### Imports 

Official trade figures show all imported pears are Ya pears from China.
Pear imports are forecast at 6,750 MT in CY 2007, up from the previous
year.

![](media/image5.wmf){width="6.000694444444444in"
height="1.8923611111111112in"}

*Source: ABARE and DAFF Data*

### Exports

Pear exports are forecast at 4,400 MT for CY 2008 representing a modest
increase on the previous year. This increase is commensurate with the
increase in production.

Pear exports have diminished greatly over the past decade. Drought, a
strong domestic market and the strength of the Australian dollar more
recently have combine to constrain imports.

![](media/image6.wmf){width="5.997222222222222in"
height="1.9770833333333333in"}

*Source: ABARE and DAFF Data*

Official trade data show trade volumes in individual export markets
declining. However, exports to Canada and New Zealand appear to be
steady which is partially explained by the strengthening of the Canadian
and New Zealand dollars in line with the Australian dollar.

![](media/image7.wmf){width="5.997222222222222in"
height="2.248611111111111in"}

Source: World Trade Atlas.

**Recent Reports from FAS/Canberra**

The reports listed below can all be downloaded from the FAS website at:
<http://www.fas.usda.gov/scriptsw/AttacheRep/default.asp>.

  ---------- ----------------------------------------------------- ----------
  **Report   **Title of Report**                                   **Date**
  Number**                                                         

  AS7068     Retail Sector Report                                  11/08/07

  AS7066     Citrus Annual                                         11/07/07

  AS7065     Ag Down Under Vol. 12                                 11/02/07

  AS7063     Dairy & Products Annual                               10/24/07

  AS7062     Issues Paper -- Safeguards Inquiry into Imports of    10/24/07
             Pig Meat                                              

  AS7061     Govt. Announces Safeguards Inquiry into Imports of    10/22/07
             Pig Meat                                              

  AS7060     ALP Wheat Marketing Proposal                          10/15/07

  AS7059     Ag Down Under Vol. 11, 2007                           10/15/07

  AS7058     Export Wheat Commission Established                   10/15/07

  AS7057     Sugar Semi-Annual                                     10/10/07

  AS7056     Biosecurity Australia -- Transitional Arrangements    10/09/07
             for Import Work Program                               

  AS7055     October Grain Lockup                                  09/28/07

  AS7054     Ag Down Under Vol. 10, 2007                           09/21/07

  AS7053     Livestock Annual                                      09/20/07

  AS7050     Ag Down Under Vol. 9, 2007                            08/31/07

  AS7049     Australia Battles Equine Influenza Outbreak           08/28/07

  AS7048     New Import Conditions for Seafood Products            08/20/07

  AS7047     New Regulations for Applying to Amend the Food        08/20/07
             Standards Code                                        

  AS7046     Cotton Quarterly Update                               08/20/07

  AS7045     New Report Released Supporting GM Crops               08/20/07

  AS7044     FAIRS Export Certificate Report                       08/20/07

  AS7043     Exporter Guide                                        08/15/07

  AS7042     Ag Down Under Vol. 8, 2007                            08/06/07

  AS7041     Grain Quarterly Update                                08/01/07

  AS7040     FAIRS Country Report                                  07/31/07

  AS7039     Senate Committee Completes Inquiry into NZ Apple      07/09/07
             Decision                                              

  AS7037     New Import Risk Analysis Process Becomes Law          06/28/07

  AS7036     Agricultural Biotechnology Annual                     06/28/07

  AS7035     Ag Down Under Vol. 7, 2007                            06/22/07

  AS7034     Parliament Passes Legislation to Amend Wheat          06/22/07
             Marketing in Australia                                

  AS7033     "Australian Grown" Logo Launched                      06/22/07

  AS7032     Biofuels Annual                                       06/08/07

  AS7030     Dairy Semi-Annual                                     05/17/07

  AS7029     Soybeans Approved for Import                          05/14/07

  AS7028     Ag DownUnder Vol. 6, 2007                             05/11/07

  AS7026     Cotton Annual                                         04/26/07

  AS7025     Senate To Hold Inquiry Into NZ Apple Decision         04/19/07

  AS7024     AWB Shareholders Sue for A\$25m                       04/18/07

  AS7023     Ag DownUnder Vol. 5, 2007                             04/13/07

  AS7021     Additional Comments Sought on Nutrition & Health      04/11/07
             Claims Standard                                       

  AS7020     Sugar Annual                                          04/10/07

  AS7018     Ag Down Under Vol. 4                                  03/27/07
  ---------- ----------------------------------------------------- ----------