FARMERS are being "over-sold" on immediate opportunities within the China-Australia free trade agreement, according to NAB agribusiness senior analyst Phin Ziebell.
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"Sometimes these agreements don't reduce tariffs as far as a lot of producers would like," he said.
"But long-term, low to zero tariffs will improve returns for producers, even if product volumes aren't increased."
Mr Ziebell was a guest speaker at the recent GRDC Farm Business update in Adelaide, where he talked about the opportunities and challenges of the FTA, with a focus on grains.
"It's easy to say FTAs and the Trans-Pacific Partnership have created huge opportunities for Australian agriculture and great things are just around the corner," he said.
"But a lot of that hype is overdone."
Mr Ziebell said in the past couple of years, there had been significant growth in Australian exports to China, particularly in wool and cotton for their textile industries, despite the lack of an FTA.
Beef had also started to take off in China, along with barley and oilseeds, all of which are considered some of the "winners" under the new FTA.
"But barley already had a low tariff anyway of about 3 per cent, so it's not that big of a deal," Mr Ziebell said.
"It's the same for pulses (7pc) and sorghum (2pc), who will also have their tariffs removed, but it's not a dramatic change from what they are today."
Other "winners" will be sheepmeat, horticulture, pork, dairy, wine and live animals.
"The removal of the 10-20pc tariff on dairy is a particularly important one given how much success New Zealand had at expanding their dairy industry largely on the back of that increasing Chinese demand," Mr Ziebell said.
"There are still questions though as to whether our dairy industry will break into the Chinese market like NZ has.
"High reliance on a single market can have downsides and Australia, which has a much bigger share of dairy production sent to the domestic market than NZ, has been more sheltered from the price downturn this year.
"Broadening our trade links through the Japan Australia FTA, Korean Australia FTA or the TPP should help lower risk."
China's agricultural policies will also have an on-going effect on demand for Australian products.
"One is China's aim to lift incomes in rural areas," Mr Ziebell said.
"Chinese ag producers, particularly grains, are not really cost competitive compared to Australian graingrowers or the world market as a whole.
"So in order to lift rural incomes, the Chinese government protect those sectors with subsidies.
"It is also why there has been no change to wheat tariffs as part of the FTA, or to milk, rice, cotton, sugar and vegetable oils.
"In the short-term, particularly for the grains industry, the opportunities are not significantly better because of domestic policies in China."
In the medium-term however, Australian livestock could see some upside, along with premium grain and stockfeed.
"As incomes increase in China, the demand for meat, beer and baked goods increases," Mr Ziebell said.
"There has been a lot of talk about the Chinese shifting away from a carbohydrate/wheat-based diet to more protein-based.
"This has come at the expense of the domestic grain industry, which has gone from consuming 140 kilograms/year in 1981 to about 80kg/year in 2011 - a significant per capita reduction.
"But it highlights an opportunity for the Australian beef and lamb industry.
"Red meat is still only a tiny part of the Chinese diet, as chicken and pork are preferred, which can be produced locally on a grand scale, but that too creates further opportunity for the Australian stockfeed industry and those that produce feed barley.
"We have already seen Australian hay exports to China increase significantly, driven purely by the Chinese domestic dairy industry."
Mr Ziebell said malting barley also had a part to play.
"The Chinese are drinking more beer and wine as they get richer and that's an opportunity for the barley industry," he said.
In summary, Mr Ziebell warned producers not to believe all the hype about the FTA, as results were mixed.
"There are some opportunities there but producers really need to be savvy and so does the industry," he said.
"We can't be the food bowl of Asia on volume but we can supply the premium end of the market with high quality produce.
"To that end, these FTAs present a long-term opportunity, rather than a short-term guarantee of success."
