Fonterra 'closely watching' China, warns coronavirus could have impact on sales

Fonterra is closely monitoring the situation in China following the coronavirus outbreak. Photo / File

New Zealand's biggest exporter, Fonterra, said the outbreak of coronavirus in China had not had an impact on its business, but that it was closely monitoring the situation there.

Some of New Zealand's key exports have already been affected.

The live crayfish trade has stopped during the most lucrative time of the year - Chinese New Year - as authorities clamp down on people congregating.

In the meat industry, production has been cut back a little until the situation in China becomes clearer.

A Fonterra spokesperson said the co-op's operations have not yet been impacted by the outbreak.

"If there is a sustained drop in consumption in China, for example fewer people eating in restaurants, then that could have an impact on our sales," the spokesperson said.

"We'll be watching GlobalDairyTrade (auction) results and our foodservice business over the coming month to get an indication."

Stats NZ's merchandise trade data showed that China increased its dominance as New Zealand's leading export destination.

Over the year, China accounted for 27.9 per cent of New Zealand's goods export values, up from 24.2 per cent over 2018.

Stats NZ data showed China had become New Zealand's biggest customer for beef, aided in part by the depletion of China's pork stocks as a result of African Swine Fever (ASF).

"Looking ahead, the coronavirus outbreak is the key short-term risk facing New Zealand's goods exports," ASB Bank senior economist Nathan Penny said.

"At this stage, we anticipate that our key export sectors such as meat and dairy will hold up well," Penny said.

"However, other export sectors such as seafood are more exposed," he said in a commentary.

Tim Hunt, head of research for Rabobank in Australia, said parallels would be drawn with the deadly Sars outbreak in China in 2003, when China accounted for less than 5 per cent of New Zealand's agricultural exports - mostly fibre.

Hunt said in NZME's The Country radio programme that for some niche exports, there would be "significant damage, at least in the short term".

China's food consumption did not fall in 2003, but there was a significant reduction in the number of people eating out, he said.

For milk powder, a household product, there was a lower level of risk.

"We do not expect a significant detrimental effect for dairy in 2020, but we are watching in case it becomes worse," Hunt said.

He expected beef to be the "star performer" in China over the year, again in reaction to ASF.

Stats NZ data showed rose 112 per cent to $1.7b in 2019 while beef exports to the US fell 20 per cent to $956 million.

Total beef exports lifted 16 per cent to $3.6b.

"In 2019, nearly half of the total value and quantity of beef exports were sent to China.
Around a quarter were exported to the US, reversing the figures for 2018 when it was the top destination," international statistics manager Darren Allan said.

The 2019 goods trade balance steadily improved over the year, despite the US-China trade war-induced global slowdown.

New Zealand's annual trade deficit went from $6.2 billion in 2018 to $4.3 billion by the end of 2019, led by food exports.

Milk powder, butter and cheese led the rise in annual exports, lifting 11 per cent to $15.8b.

- Additional reporting BusinessDesk.