This will not only weigh on grower returns, but could also affect the availability, quality and price of this summer and festive fruit favourite for Australian consumers, the specialist agribusiness bank says.
In the report, 'Southern Hemisphere Cherries, Growing Exports and Challenges', Rabobank says Australia's sweet cherry sector has been in a growth phase for the past four years, with more than 450,000 additional cherry trees reaching bearing age since 2018.
Despite this growth in plantings, sweet cherry production and export volumes "continue to be affected by three consecutive La Nina weather events", the bank says.
This impact was evident last season, says report co-author RaboResearch associate analyst Pia Piggott, with the industry estimating that Australia's total cherry production for 2021/22 was down 15 per cent on the previous year, at 17,000 tonnes. Total Australian cherry volumes to export markets – which require the highest-quality premium fruit – decreased 20 per cent on the previous year.
"The major cherry-production states of New South Wales and Victoria were particularly affected by cherry splitting caused by above-average rainfall in November 2021, resulting in the volume of exports from these states being down by 51 per cent and 32 per cent year-on-year respectively," she said.
"The combination of adverse weather events in Australia, together with transport and logistical challenges during the 2021/22 cherry season, saw decreased exports to key markets – particularly to China, where exports fell 68 per cent year-on-year."
This year's crop
"This could see reduced local availability of the fruit for Australian consumers and lower volumes for export coming out of New South Wales, Victoria and Tasmania – states which between them account for, on average, for 81 per cent of Australia's cherry production," she said.
"With peak domestic cherry consumption coinciding with Christmas, late season rain will likely cause lower-than-average supply of the festive fruit, supporting higher prices for growers, but potentially seeing shoppers pay more."
Ms Piggott said this comes at a time when overall fruit price inflation is at high levels in Australia, primarily due to the impacts of recent wet weather conditions on production and supply.
"The latest September quarter Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS) shows annual fruit price inflation now sitting at 14.6 per cent," she said.
Export value
Ms Piggott said export markets are particularly important for Australia's cherry industry, due to "higher unit value" obtainable for exported fruit.
"Exports account for approximately 25 per cent of the Australian cherry industry's sales volumes, but almost 40 per cent of sale value," she said.
"So lower volumes of high-quality cherries suitable for export markets – along with outbound airfreight rates remaining high – means margins will be challenged for the sector this coming season."
Ms Piggott said Australia's cherries are squarely positioned at the premium end in export markets, with "our fruit among highest quality and most expensive on the market".
"Australian cherries are some of the most expensive in the world. As a high quality, air-flown and scarce fruit, Australian cherries attract a high price in the export market. And in China, Australian cherries are seen as a perfect luxury gift for the celebration of Chinese New Year," she said.
Southern hemisphere production
More broadly, the report says this year's southern hemisphere sweet cherry production season – which supplies world markets from mid-October to mid-February – has started. And while the Australian harvest may be down, record volumes are expected from other countries, including key export competitors New Zealand, Chile, Argentina and South Africa.
"This will test how the 'return to normal' post Covid is working, and how the main export destination markets will behave," Ms Piggott said. "With China a key export market for southern hemisphere cherry producers, including Australia, all eyes will be on the Chinese market to see how the country's continuing zero-Covid policy impacts demand."
Ms Piggott said while Chile had accounted for 96 per cent of southern hemisphere cherry supply in the past season, New Zealand was also a significant competitor to Australia in the premium end of the market.
Challenges and opportunities
The Rabobank report says all cherry-producing countries in the southern hemisphere are currently facing challenges, with increasing competition, declining prices and narrowing margins due to elevated production costs.
"In terms of responding to these challenges, Chile, Argentina, and Australia are moving in the same direction in improving efficiency in their processes, focusing into high-quality production and diversifying their destination markets' Ms Piggott said. "In particular, we will continue to see these countries trying to achieve earlier production in order to move away from the peak of supply and achieve higher returns."
The report says while industry players believe it will be hard for southern hemisphere cherry producers to replicate the success achieved in China in other northern hemisphere export markets, such as the US or Europe – as consumers generally prefer cherries as summer eating – there are opportunities for growth.
Sweet cherry consumption is still low in other markets, with plenty of space to grow, the report says.
Ms Piggott said longer-term demand for high-quality cherries as prized fruit in Asia, and in the domestic Australian market – together with healthy lifestyle trends – will support growth opportunities in the Australian cherry industry. "Australian cherries remain competitive in the export market, although production risks, elevated input cost and labour challenges persist for growers," she said.
