Product to market
The current global environment really tests the depth of our trading relationships. Those with strong long-term relationships will come out through this crisis in better shape than those who don’t.
One of the biggest challenges facing New Zealand’s exporters at present is the logistics of getting product to market. This is particularly the case for high-value foods that need to be kept cool.
Cool storage capacity in New Zealand is limited meaning Kiwis are highly reliant on shipping goods out of the country almost as quickly as they are produced. At present there is a shortage of refrigerated containers in New Zealand due to ports not being cleared as quickly as normal – initially in China and now elsewhere. In New Zealand ports, essential goods like food exports are being prioritised but containers holding non-essential imported goods are currently not being emptied and therefore returned into circulation as quickly as needed.
Airfreight options have been greatly reduced due to the drastic cutback in flights into and out of New Zealand. This situation is not likely to change any time soon so any cargo that needs to be airfreighted will need to go on a flight specifically chartered for that purpose which will add to the cost.
The cost of shipping by sea, however, has fallen due to the drastic drop in oil prices. This will help to keep exports competitive and will be particularly welcomed by sectors such as forestry that export large quantities of relatively low-value goods. Not that any logs are being shipped right now as forestry is not deemed an essential service but low oil prices seem likely to persist for some time.
A lack of cool storage space and a potential shortfall of workers means some apples and kiwifruit may not be picked this season. There is a real risk that pack-houses and processing plants that operate with a large number of people in a relatively confined area will be subjected to regular shut-downs as they try to limit health risks. Workers are being spaced out more than usual to minimise risks but this also means productivity levels are immediately reduced, even halved. Automated technology solutions will become a lot more valuable this season.
Livestock processing is continuing but at lower capacity than normal. Delays and backlogs of stock are inevitable, making forward planning a must this season.
Sale yards are closed but livestock agents are still operating and listings on online platforms are expected to jump. The technology to sell livestock online has been operational for years but the willingness to trade stock in this manner hasn’t necessarily been there. These online platforms don’t provide the banter and social experience that a sale yard does but they do have some advantages such as reduced transportation costs and improved animal welfare outcomes, as well as being compatible with social distancing.
Susan Kilsby is NZ Agriculture Economist & Sharon Zollner is NZ Chief Economist at ANZ