There are three reasons why the coronavirus outbreak is worse for New Zealand agriculture than SARS was in 2003 says Rabobank Senior Analyst and RaboResearch GM Tim Hunt.
"Firstly the virus has infected about 10 times more people. Secondly it's continuing to spread, and thirdly, New Zealand's exposure to China has increased hugely."
The author of Rabobank's comprehensive report Coronavirus: Impacts on New Zealand's Food and Agribusiness sector told The Country's Jamie Mackay that New Zealand exports to China had also changed since 2003.
"When SARS broke out New Zealand sent less than five per cent of exports to China and most of that was fibres for re-export. Today 30 per cent of New Zealand Ag exports head to China, a lot of that is meat and dairy, and most of that's for domestic consumption."
Other problems facing exports was getting products into and around China, and a drop in Chinese people eating out said Hunt.
However, organic and online products were a "logical place for people to turn" in China, but there were difficulties here too.
"You've still got to get the apples into China and they've still got to be able to distribute them domestically, but we do expect to see a pick up in online as a result of this in the coming months."
Commodity specific comments from Rabobank's Coronavirus update:
• At this stage Rabobank expects limited first round impacts on dairy shipments to China from New Zealand.
• Most of what is shipped (powders, IMF) has a good shelf life and is sold for consumption at home. For these products, logistical disruption is the key risk.
• While cheese still has a good shelf life, it is mainly used in food service so is more exposed to any downturn in food service (especially western style fast food).
• Disruption to supply chains in China has made it difficult to distribute red meat imports, negatively impacting China's short-term import demand until these supply chain distributions are resolved.
• Reduced eating out by Chinese consumers is expected to create some additional short term disruption to demand for imported red meat.
• NZ exporters have the ability to redirect lamb exports into alternative markets where demand remains solid, albeit at a discounted price which will put downward pressure on prices.
• Limited alternative markets for mutton (with > 70 per cent NZ mutton exports going to China) potentially means a slowdown in mutton processing until supply chain distribution resolved.
• New Zealand exporters have the ability to redirect manufacturing beef product into the US market, where demand remains healthy, although exporters will have more difficulty finding market space for prime beef (which has become increasingly reliant on China in recent years). This could see bull and cow processing prioritised over prime cattle in the short-term, increasing waiting times for farmers wanting to get prime cattle killed.
• 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.
• Labour shortages due to travel restrictions and factory shutdowns are expected to reduce Chinese import demand in the short-term.
• At this point, most factories are expected to start re-opening this week.
• However, this depends on whether the spread of the disease can be curtailed.
• Depending on the extent of coronavirus there may be implications for the Chinese economy which would impact longer term demand for New Zealand wool.
• On-premise consumption of wine in China in 2019 accounted for around one third of sales. Rabobank expects sales into this channel to fall in the short-term whilst restrictions on group dining remain in place.
• Rabobank expects volumes of wine sold via e-commerce will rise as distributors attempt to push more product into, and invest more money in developing, this sales channel. New Zealand has limited exposure to the Chinese wine market in general.
• Fortunately the cherry industry had air freighted most of its crop to China before the virus hit: something that would have been highly problematic a month later.
• In the next two to three months the main threat to export fruit and vegetable crops will be logistical, with demand from Chinese consumers for quality imported fresh produce not expected to reduce from current levels.