Rabobank says demand should recover by June once stored product is consumed if the virus is contained by the end of March
With housebound Chinese causing disrupting restaurant trade and distribution networks Rabobank estimates revenue for both retail and food service over the Chinese New Year could be back 50% to 80% on last year or $13.6 billion to $21 billion.
The Chinese government-mandated shutdown is easing in most regions allowing people to return to work and freight to move off congested wharves.
AgriHQ analyst Nicola Dennis says the logistical backlog of moving freight and documenting products from the extended shut-down is hampering the transport of goods into and within China.
“NZ exports are making their way through the Chinese ports to willing buyers.
“However, the process is very slow and shipping companies are reluctant to ship to backlogged ports, particularly Shanghai.”
The underlying drivers of the Chinese protein shortage remain and provided the virus response doesn’t weaken the economy the demand should recover, Dennis said.
Alliance livestock and shareholder services manager Danny Hailes says it is processing as normal, with product being directed to other markets as it waits for Chinese demand to pick up.
This is affecting prices with returns for some by-products halving because of the absence of the Chinese.
Silver Fern Farms chief executive Simon Limmer says coronavirus and the North Island drought have created a perfect storm and the company is working to balance the needs of farmers, animal welfare and its operations.
Limmer expects the Chinese economy to recover though shipping lines are reluctant to sail there fearing the build-up of freight will prevent them from docking.
“We believe the underlying demand in China is not going away. This is a supply chain issue.”
RaboResearch general manager Tim Hunt says the coronavirus outbreak differs from Sars in 2003 because it has spread further and faster and NZ trade has greater exposure to China, accounting for 31% of agricultural exports in 2019 compared to 5% in 2005.
Should the virus linger the subsequent economic disruption could force incomes to fall affecting growth in sales of premium food and beverage products.
“An important stabiliser for our food and agribusiness industry in the event that coronavirus did start to have these second-round effects is that the NZ dollar would likely depreciate significantly as the market responded to slowing economic growth and rising risk concerns.”
Hunt says meat has been hardest hit while the longer shelf life for dairy products has limited the price impact on those products but the underlying principles remain.
“The general shortage of protein in China as a result of the African swine fever outbreak is still expected to result in ongoing strong demand from China once the short-term impacts of coronavirus are overcome.”
The Reserve Bank noted in its February official cash rate decision the coronavirus is an emerging downside risk at a time when the global economic environment is showing signs of stabilising and trade tensions have receded.
Some forestry companies have resumed limited harvesting while Zespri chief executive Dan Mathieson says it has noticed a significant spike in home-delivered fruit orders, which typically form 20% of the company’s retail sales.
