The contortions New Zealand's agriculture industry, especially the red meat sector, have had to work through thanks to Covid-19, have been quite extraordinary.
"What's been truly impressive has been the adaptability through the supply chain," says Todd Charteris, CEO of rural lending specialist, Rabobank.
For the horticulture industry, the timing of Covid-19's arrival in New Zealand was critical — giving growers just enough time for a crucial window of harvest to be completed.
"For apple growers, kiwifruit growers, the grape harvest, the risk of impact of infection was huge," says Charteris.
For the kiwifruit industry, as an example, there are 26,000 people involved in the supply chain — growers, packers, processors and there was not a single case of Covid-19 among them, he says.
"The window of harvest came. Despite the challenges, they came together, and everything was processed. It's a fantastic story," says the Rabobank CEO.
Meanwhile red meat suppliers had challenges because of the social/physical distancing regulations, says Rabobank's agriculture and sustainability analyst, Blake Holgate.
The new working conditions meant sheep processing was initially down 50 per cent because meat plants could only process half the numbers, while beef was down 30 per cent. But the industry very quickly adapted and brought things up to normal numbers.
At the same time, the meat sector had to find alternatives to major export markets as China, New Zealand's largest market for beef and lamb, dropped its demand for red meat by around 60 per cent in February. So New Zealand increased its sheep meat exports to the EU, the UK and the Middle East.
Meat producers also stepped up their beef exports to Japan, Taiwan and Korea over this period and when retail beef prices soared in the US during April, due to domestic processing struggles, New Zealand was one of the countries to increase its beef supply there. By April, the usual supply of beef and sheep reverted back to China.
We need to look at where and how people eat food.
One of the big changes NZ meat producers had to cope with was specifically just where product was going, and the channels it was going through. Rather than food service and restaurants, demand was coming from food retail.
"There was a huge drop off in food service and into food retail and it's not easy to change from one channel to the other," says Holgate. The packaging and certifications are different, for instance.
Throughout the Covid-19 crisis pricing has held up relatively well for beef and lamb producers, says Holgate. Beef is sitting now at where prices were last year, around 3-5 per cent below average while lamb is 7-8 per cent down on last year but last year's prices were high.
While export values are higher January to April, what farmers are getting has been lower since February. Average export prices are down from the record highs last December but are still up year on year.
New Zealand supply chain has proven adaptabilityAs a country that produces a huge food surplus, New Zealand agriculture lives or dies on its exports, says Charteris. It is so important at times like this that there are strong relationships with a diverse range of markets.
Also, what has really become clear is the reputation New Zealand has built up as a trading partner and supplier of high-quality food during this period. This is super important, adds Charteris.
Yes, we've got a great story to tell but we do need to substantiate that.
Meanwhile, as tourism in New Zealand for international visitors has had to take a step back, Charteris' ambition for the country's agriculture sector is that it steps up and increases in value in the coming months.
"You can see that in the markets, Zespri's announcement that it's increased export revenues, increased in value. That's a real opportunity for us in the agriculture sector."
There is a real sense of pride in the agriculture sector in terms of the importance of always being there for the country, says the Rabobank CEO.
The rural bank lender's role meanwhile will be to help farms with increased consumer expectations, around producing quality animals, treating staff well and the environment, its land, soil and water.
"We're spending time one on one with farming clients to better understand where the opportunities lie," says Charteris.
"Yes, we've got a great story to tell but we do need to substantiate that."
Challenges ahead for NZ meat producersAs an economic recession kicks in globally, consumers will be responding by trading down on their protein, predicts Holgate. They might get a burger rather than a steak or might buy poultry or pork because it is perceived as cheaper.
He believes there will be structural changes around what the industry does longer-term regarding food consumption and sales channels. Governments will be more intent about shoring up domestic supply and more protectionism could happen.
"New Zealand has, however, demonstrated that it is capable of producing export food throughout adverse circumstances," he says.
New Zealand has shown it had a reliable food chain and it's important that negotiators make this clear to export countries, he adds.
Longer-term, the NZ meat industry needs to consider what it does when it comes to food consumption and sales channels. It will be important to think about the diversity of markets and of sales channels and to redirect to those sales channels, he says.
"We need to look beyond this. To look at where and how people eat food, to facilitate online purchasing of food and meal kits, with people learning to enjoy more food cooked at home," says Holgate.
New Zealand is in a good position to capitalise on these new opportunities and channels, he argues. "It's nimble enough to adapt and tap into market changes. We don't produce huge volumes like Brazil, we can be pickier about how we go about it. But we can't get complacent about how robust borders are."
Exchange of information key"One of the things we've learned through this is the importance of timely information on what's occurring in the marketplace. We've been able to research and exchange knowledge and that's very important," says Charteris.
Rabobank drew from its team of global analysts to get timely information. "The world is an even smaller place," he says. It is about translating this information from a global perspective, to what it means locally and how it is applied and maximised at home.
Meanwhile the New Zealand and Australian agriculture industries can collaborate more. The transfer of information and knowledge could be made easier, he says.