AGRICULTURE industries with a finger in the export pie should be bracing for further fallout from fast-deteriorating relations between China and Australia - and not just those sectors that have already had a taste of the sourness.
So says prominent market research company IBISWorld, which has identified the next industries likely to be dragged over the chopping block of Chinese tariffs, bans and technical barriers to trade.
Agriculture is most at risk and dairy, honey and fruit should now be on high alert, according to IBISWorld.
Senior industry analyst Liam Harrison said while some players were already looking to diversify, others were waiting to see how diplomatic tensions played out.
Until more certainty comes in, it would be wise to create a little nest egg to shield from continuing fallout, he said.
"The key aspect to what is happening is the uncertainty," Mr Harrison explained.
"Trade conflicts can be like fireworks - big bangs and then it's all over. Or they can be a slow burning candle with repercussions felt for years.
"In the past, trade issues with China have tended to die down after a few months as the particular situations causing them are resolved. However, in this case it is getting close to what we'd classify as medium term and our government is reporting they are finding it difficult to even open negotiations.
"This is really the first time such tensions have reached this level. Relations between China and Australia have hit their lowest point in over half a century."
IBISWorld says China was Australia's largest export destination in 2019-20, accounting for 35.3 per cent of Australia's merchandise and service exports.
"Australian industries have invested heavily in expanding their trade with China since the China-Australia Free Trade Agreement was signed in December 2015. The tariffs and trade restrictions introduced over the past year have pulled out the rug from beneath many Australian businesses, dissuading businesses from pursuing trade with China," Mr Harrison said.
Wine, seafood, coal and copper mining and meat processing have been hardest hit.
In 2015, China accounted for 10pc of Australia's general meat trade but that is now around a quarter, Mr Harrison said.
"It's fast-growing and very lucrative," he said.
Therein lies a critical point, particularly when it comes to the beef and dairy industries.
Volume versus value
"Looking to diversify comes with its own level of risk because it's not just about volume, its about value," Mr Harrison said.
"Securing alternate markets doesn't necessarily mean securing value."
Indeed, Australia's beef industry sends product to more than a hundred markets but the opportunities presenting from growing demand for premium product in China are very strong.
"Geography allows us to have a strong chilled beef trade to China - we have a smaller shipping lane and a large industry and demand for that product in China is expected to keep growing," Mr Harrison said.
Continuing trade fallout will depend largely on how easy China can source alternative suppliers, he said.
"With beef, for example, it will come down to whether consumers are willing to forego the premium quality and substitute to other countries," he said.
Milk, honey and fruit
IBISWorld reports Australia's dairy industry, in particular milk and cream processing and milk powder manufacturing, is highly vulnerable to shifts in Chinese tariff policy.
Dairy Australia's December Situation and Outlook report said Chinese demand had continued to keep the market relatively well balanced and been the main driver of a 3.8pc increase in global dairy trade in the 12 months to August.
Mr Harrison believes tariffs on Australian dairy would represent a significant escalation in trade hostilities.
Australian dairy products were highly popular and there were few substitute markets for baby formula that Chinese parents were willing to trust, he pointed out.
"Action against this market would likely cause significant backlash from Chinese consumers and could result in weakened support for continuing trade restrictions against Australia," he said.
Australian honey is also popular in China, particularly premium manuka which is known for its antibacterial properties.
Manuka is harvested from a tea tree only found in Australia and New Zealand. However, there are plenty of suppliers of honey worldwide ready to step in should China block Australian imports.
And losing China as an export market could be devastating for fruit farmers, IBISWorld says.