Andrew Ferguson’s family-owned Ferguson Australia Group processes one quarter of Southern Rock Lobsters in South Australia
Australia’s southern rock lobster is the most prized of lobsters and nowhere is it valued more than in China
25 June 2020 | Marcus Reubenstein
“There is a certain understanding and appreciation of seafood by Chinese consumers,” says Andrew Ferguson, whose family has been fishing for lobsters in South Australia for three generations.
His business is ideally suited to the Chinese market. “You can go to markets like Europe where there are different varieties of lobster but people cannot really tell the difference between them. The Chinese can definitely taste the difference and the southern rock lobster is at the top.
“On very important occasions southern rock lobster is the one they want to serve on the plate,” he says.
Chinese consumers know exactly what they want and Andrew Ferguson’s family business, which handles between 25-30 percent of South Australia’s lobster catch, knows exactly how to get it there. In the COVID-19 world that is not going to be easy.
The air freight challenge
Live whole lobsters command the best price for exported product and the only way to get live lobsters to China from Australia’s three main lobster producing states (South Australia, Western Australia and Tasmania) is by air.
Before coronavirus hit around 50% of airfreight from Australia to China was carried in commercial passenger flights. The international travel ban has all but wiped out those flights.
“We’re heading for a bit of a train wreck,” says Ferguson. “A lot of our product gets trucked to Melbourne and flown mainly to Shanghai with direct flights. Because it is such a perishable product, we need direct flights, we need lobsters to arrive in China at the right time of the day so it’s not sitting around.”
Though major airlines have cargo divisions few of them have dedicated cargo aircraft. Apart from 1.5 million visitors, the Chinese tourist boom had also delivered enormous capacity for air cargo.
Says Ferguson, “Pre-coronavirus we had 16 flights a week out of Melbourne, now we’re back to three. We’re coping at the moment because we’re on the shoulder of the fishing season, come the start of the of the lobster season we are going to have trouble getting product out in a timely fashion.”
The long road to success
Half a century ago, Andrew Ferguson’s father, who was a farmer, left the land and moved to Kingston 300 kilometres from Adelaide along the southern Australian coastline.
He bought a fishing boat and began catching lobsters in 1969. Andrew worked with his father until 1980 before purchasing his own boat and with his first exports of frozen lobster medallions sold into the European market.
He says, “From 1988 to 1989 the Sothern Rock Lobster industry shifted from the American frozen tail market to the Chinese live market. A couple of entrepreneurial lobster fisherman started exporting live lobsters to China in their own tanks and it started from there.
“The US market couldn’t keep pace the Chinese market and almost overnight it trended into the Chinese market.”Andrew Ferguson, Managing Director Ferguson Group
Over the past two decades the Ferguson Group has diversified and, in addition to lobsters, now sells fish, prawns, tuna, crabs and scallops. The business has been recognized though numerous awards including being named as South Australia’s best export agribusiness.
Family business is a great fit for China
While a number of large companies and investors have bought into the lobster fishing industry, around 70% of South Australian operators remain family businesses.
“Family business helps our business model,” says Ferguson. “We’ve got a lot of trust with our suppliers. We run our own fishing boats but we also have relationships with other fishermen and being family-owned really helps us in maintaining our business relationships.”
That business culture built on long-terms relationships has proved an enormous help in opening up the Chinese market.
The key to the Chinese market, he thinks, is quite obvious, “It’s travelling, which means going to China.
“It’s about building and forging relationships. I first went there twenty years ago, it’s about getting to know people and going back to see them again and again and again. It really is a simple process of relationship building.”
An export relationship that makes sense
An enormous frustration for family owned agribusiness l and primary producers is the constant calls from a small group of outspoken media and political commentators that Australia should export to countries other than China.
These calls are almost universally coming from quarters where critics will not lose their livelihoods if trade is forced to shift from China to other nations.
Relationships have been built up over many years, in the case of Andrew Ferguson two decades, and it is impossible to abandon long-term overseas buyers and expect to walk into another market straight away.
Another key factor is that Chinese buyers offer the best price for Australian lobsters. Chinese buyers will pay up to 50 percent more for southern rock lobsters than Australian consumers.
“That’s exactly the issue,” says Ferguson, “and that’s why we are better off working with China because they respect the product. They want it and our relationships with China are very important.
“We want to keep the doors as wide open as we possibly can because it is a big market and certainly the best price we can achieve is in China.”
His Ferguson Group is not entirely reliant on China, but it is simply the best market. He says, “We can sell to Japan, but there’s less demand and they want smaller lobsters at a lower price point.
“We’ve sold to the Middle East and we’ve sold to France, but it all falls away once the price of the lobster reaches the fifty-dollar mark. The price point in China is typically ten to twenty dollars a kilogram better than we can achieve in other markets. It’s all about quality they are willing to pay for the quality there’s no doubt about it.”
Lobster exports feed Australians too
According to Commonwealth research agency ABARES, the total value of lobster exports to China is A$660 million, that money mostly flows back to small operators.
The Ferguson Group processes seafood produce for more than 350 small family-owned businesses.
Falling demand at the height of the coronavirus outbreak and now lack of airfreight capacity to China has seen prices paid to fisherman drop by more than 50 percent, while their fixed costs remain high.
The median price for second-hand lobster boats in South Australia is between A$450,000 to A$500,000 and those younger families who’ve borrowed money to buy their boats simply cannot afford to see prices fall.
One small operator, who did not want to be identified, says, “Reviving access to the China market is the only way for me to stay in business.”
Government assistance is not enough
In April the Australian government came to the rescue, with a A$110 million package called the International Freight Assistance Mechanism which subsidies air cargo flights from Australian to 17 different destinations. However, there are no flights direct to Mainland China and only one flight from Adelaide, which goes to Hong Kong.
Ferguson points out, “The problem we have is getting government to understand logistics and that’s difficult. We have alternative flights through Singapore Airlines and Cathy Pacific but they don’t always link up to our mainland China destinations.”
Up until now there has never been a coordinated export approach across all industries air freighting fresh produce exports.
He adds, “You’ve got cherry growers, the West Australian lobster industry want to get product into southern China, we want to get into northern China. There’s a wide range of produce exporters but we’ve never been synced up in the way we air freight to China.
“We didn’t realize how fortunate we were pre-COVID-19 and this just makes it all stand out. It’s going to be a difficult process to try and fix and, until there’s a vaccine, this problem’s going to be around for quite a while.”