Australia's fruit industry is expected to 'flourish' over the next five years with an annualized growth rate of 4.4%, according to a recent report by market researcher IBISWorld.

The company's 'Citrus, Banana and Other Fruit Growing 2011-12' report says the industry's revenue could hit AUD$2.64 billion (US$2.54 billion) in 2016-17.

Factors leading to the forecast include stable domestic and global demand, greater water availability, increased production and growth opportunities due to the popularity of organic produce.

The estimate represents a significant change from the average growth of 0.7% over the last five years, which is due to the 'devastating consequences' of natural disasters, and an annualized export decline of 7.1%.

The fall in exports was partly offset by domestic fruit consumption, which grew at an annualized rate of 2.4% during the period.

However, IBISWorld expects an uptick in shipments over the next five years.

"Over the next five years, Australian fruit exports are projected to grow alongside production volumes. However, returns will be limited due to the high Australian dollar and fierce competition on the global market," the report said.

The report says the U.S. is currently Australia's leading fruit export destination at 21%, followed by Hong Kong (16%), Japan (11%), India (8%) and New Zealand (5%).

Industry exports stood at AUD$233 million (US$225 million) in 2011-12 and industry profit was AUD$140.1 million (US$135 million).

Growth challenges

Despite the optimistic outlook, the report pointed to several factors that could impede growth over the next five years, including competition with low cost imports and the increasing incidence of extreme weather patterns due to the possible onset of climate change.

The report also highlighted the difficulties for growers due to the supply chain structure, but claimed wholesale bypassing could help farmers reduce sales volatility.

"An ongoing concern for growers is their diminished returns relative to other business links along the supply chain. Changes in downstream retail demand have seen an increase in direct purchasing of fresh produce by supermarkets.

"The substantial buying power of large supermarket chains has increased price pressure and eroded margins for farmers. This has become a significant barrier to entry given the considerable number of farms.

IBISWorld also raised concerns about rising competition in key South East Asian markets from Chile, New Zealand and South Africa.

The main countries of origin for Australian fruit purchases are New Zealand (38%), the U.S. (31%) and China (12%).

The main fruit categories considered in the report are avocados, citrus fruits, bananas, berries, nuts, mangoes, other tropical fruit and all other fruit.

IBISWorld also conducts specific studies into grapes, pome fruit and stonefruit.

Related story: Facing Australia's fresh produce oversupply hurdles

www.freshfruitportal.com