Guy Trafford looks for signs that trade is restarting in China, and the impact distortions are having on the movement of imported food. It a nervous time for food exporters here

Guy Trafford looks for signs that trade is restarting in China, and the impact distortions are having on the movement of imported food. It a nervous time for food exporters here

Over the last couple of days news coming out of China has indicated that some sort of normality is starting to become re-established.

Numbers of new infections are down, and workers are returning to the logistic industries (ports and transport etc). The South China Morning Post has reported that February’s rail movements are up +4.5% on last year despite manufacturing and services hitting an all-time low. GDP for the first quarter of 2020 is likely to be a negative for the first time since the early 1970s’ and the ill-fated cultural revolution.

So, the question for New Zealand exporters is whether the ability to move freight around, namely meat and dairy products in this case, trumps rising unemployment and factories remaining closed, and so the consumer's ability to purchase imported food.

China has relaxed its fiscal policies and lowered interest rates to try to help stimulate to economy however, pundits are picking the Government will not go as far as they did in 2008 when over US$500 bln was ploughed into the economy which resulted in local governments mired in “massive debts”. So, thoughts that the splashing out of Government to drive the remaing years GDP should be kept to modest levels.

The predictions are now that the negative impacts on the China economy will persist until the end of the year. The domestic agricultural sector was already being hammered by African Swine Fever, and Covid 19 has depleted its work force right through the chain and food  prices have become greatly inflated as a result. In January alone it is reported to have risen by +15.2% for Food and Tobacco. This may provide some early hope/opportunities for New Zealand food exporters.

Given New Zealand’s falling dollar against most other currencies, the yuan included going from over 4.7 in December to be sitting at 4.35 now. In the same period as above the Kiwi dollar has gone from over 67.2 USc to being around 62.5 USc currently (showing a slight rebound from 62.2 USc). If the Reserve Bank lowers the OCR that should provide more downward pressure on the Kiwi dollar. Already the largest major exporter of food into China, this low exchange rate should make us an attractive source of protein, almost regardless of their internal economy.

Trying to find sound evidence that produce, of any type, are flowing from the ports now is proving difficult. The most clear picture has come from the New York Times  which reported that the ports are still jammed up with all sorts products, ranging from iron ore to any other of numerous products including food; “Shanghai, Ningbo and Xingang — were clogged with refrigerated containers full of imported vegetables, fruit and frozen meat.” The issue appears to be not the cranes unloading the ships but trucks ability to clear them away to the hinterland.

As of last week, only 60% of Chinas’ trucks were reported as ‘working’ resulting in the build-up at the ports. To help prevent spoilage Maersk is charging a US$1,000 fee on electricity for food containers to encourage shipping companies to keep their ships away from the port until trucks can be found to move the containers inland. It has to be hoped from a New Zealand perspective that food is given priority over other ‘bulk’ goods. This may mean that New Zealand will gain an economic advantage over other countries, at least temporarily.

At the same time that our most important trading partner is showing the potential for some life soon our most major secondary markets, notably the EU (including the UK ) and the USA are now heading down the pathway to where China was two months ago.

We are already seeing consumer habits changing with people not eating out and habits becoming more conservative. The result is we have to hope the revitalisation in China occurs at least as fast as the shut down in Europe and the USA occurs. There is likely to be a world recession occur through this year, the degree of it will depend upon the timing of the Covid-19 impacts on the major economies. Having all our major markets ‘closed’ at the same time (compounded by the drought) is the perfect storm we really don’t want. We can only hope that our secondary markets ability to contain the spread is successful to buy time for the development of a vaccine and also to buy time for the Chinese economy to start to re-open. The all gone-wrong-option looks pretty bleak for all concerned.

The ability of our Government to buffer against the effects is likely to be limited. The Reserve Bank can lower the dollar (not a government decision to make) and while the government coffers are looking healthy for the present the ability to be able to make positive impacts upon the export sectors is going to be difficult. Their actions are more likely to be, as we are already seeing, providing short time employment packages and more WINZ funding for those losing jobs and income. Hopefully the farming fraternity can ride through it, be it with some tolerances from the banks.

The option of doing nothing with the current 70% of the population that China says seem to contract the virus and the  2.2% death rate that accompanies this "could" result in 115 million deaths worldwide and for New Zealand if we follow the same stats, up to  69,000 deaths "could" occur. To put this into perspective we currently have around 33,000 deaths per year. A 200% increase is something we don’t want to contemplate.

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36 Comments

Some sort of normality, Guy?

The real normal is real long-term sustainability - and that isn't what you think of as 'normal'. Your 'normal' was a temporary aberration thanks to fossil energy and resource/sink capacity draw-down. Wring your hands you may, but reality is a matter of physics.

And although it is abhorrent to most, the fact is that the planet is overstocked with homo-not-very-sapients, probably by 5-6 billion (others argue even more). One way or another, the adjustment will be made.

China, in country data still looks business lifeless.

https://www.capitaleconomics.com/the-economic-effects-of-the-coronavirus/

February’s rail movements are up +4.5% on last year. Chinese New Year Holiday for 2019 was 4-10 Feb, So that would have impacted Feb demand for 2019. Rail also has a modal advantage (state-run). Amplified especially when sea freight capacity is being removed by shipping lines (commercial companies that make commercial decisions). There are efficient rail options for containers ex-China into mainland Europe which will be proving very attractive to those European importers that do have their factories on line and product available in China to ship. 11-15 day transit time. An opportunity to catch up the lost 1-2 weeks worth of inventory vs waiting for sea freight. Due to the extended CV shut down. Meanwhile, 40% of Chinas trucks are still not working.
Would be great to get from NZ Customs/Stats NZ ASAP the year to date numbers for NZ imports ex-China and NZ Exports to China. 2019 vs 2020 up to today. By shipment numbers and commodity breakdown. That will give a clear picture of where we are at right now. I am sure they could produce that within a day if asked nicely. Updated weekly so we can see a trend towards normal or an extension of the gap that would be there now.

I have full confidence on a quick, orderly and smooth recovery of Chinese economy led by CCP and contributed by all Chinese people.

Great effort.

NZ's economy will benefit enormously from it.

I'll tighten my belt and hit the road immediately.

Oppositexing.

Put that pipe down Xing! You are talking gibberish..

Sir (ed -surely that's taking the proverbial) John Key will be saying to any one foolish enough to talk to him in the lounge - " At the end of the day most reasonable minded people will see this as a minor hiccup in my - I mean NZ's relationship with China and our doubling of agriculture by 2025.

We need to get rid of agriculture and double out multi-culture.

Agreed, as comrade Xingmow said.. the rest of the world need to follow Chinese steps here, isolation, no people movement in/out (except for Chinese that is), no goods in/out (also except for Chinese goods) - and do tell NZ public, as to what is the cost behind this economy benefit? is it given away for free? - there's always a cost behind it. One thing for sure, NZ started to realised, any unforeseen future disruption within China - really do make an impact for small Nation such as NZ, so may be moving forward to the future NZ need to be more diversified? China is not the only country on this planet right? - must be something else on the life of us or this planet worth to collaborate about, apart from.. 'economic benefit' - I for one really can advocated the local Maori to learn about Chinese calligraphy.. rather than just carving, or Chinese KungFu.. rather than just K/Haka
Just don't tell CCP that actually their future strength is by following those Uyghur Moslem diet. But who am I? advising Chinese what not to eat - as comrade Xing advise.. they already existed as 'the only' civilisation on this planet that exist the past 5000years or so - But I keep wandering as to why move out from China? - if that country is so great about.

Give us a break mo, how many websites do the CCP have you running the propoganda for?

"numbers of new infections is down"
Do you mean "CCP figures state..."??
South Korea had 1000 new cases yesterday.
Their pop is 51million cf China at 1.4Billion
So, China topped out we are told at 4000 new per day.
S Korea new case rate and its rate of increase suggests China is under-stating the infections by a factor of 7

You're missing the fact that China locked down significant parts of their country several weeks ago (hence the issues discussed in this article). This will have dramatically slowed down spread. Not saying I fully believe the figures, but I would not be surprised to see faster spread in countries where outbreaks are relatively new and lockdowns haven't yet taken effect (even if they are started it will take a while for infections to work through and the spread to actually slow)

There are quite few commenters here constantly making fun of my fact based judgments and comments on China.

Bias against unfamiliar things or just simply ones own pride and prejudice have damaged their critical thinking ability.

Opinions are what they live off but not facts.

It is a little rich for you to criticise others for showing bias.

You want facts, CCP-bot #173491?
The fact is, if NZ had a similar regime as China, your comments about NZ would all get censored and you would already be rotting in a gulag. Those are facts.
Keep sucking up to your party though, one day you might end up as a National MP if you play your cards right.

More likely to be a Labour MP, at least until Labour falls out of favor...

Ha ha..try to live in more countries than just NZ/China Xingbrow... and check out the local facts before you pan out your own bias.

The WHO figures are 'correct' in the sense that they show the tested & confirmed cases. No test, no confirmation -> shows up az zero. The WHO doesn't post estimated figures. Since there's no way on Earth for China (or any country) to test its whole population, these numbers will always be much lower than the actual number of infections.

China is looking to ramp up food production - for the first time since the 1990's - with double-cropping.
"The so-called double-crop rice is a piece of ground, where early rice is planted first and late rice is planted."
"....we must keep in mind that the restoration of double-crop rice requires labor"
Migrant works are not returning to the factories, they are being redeployed into the fields - no return to normal any time soon.
http://www.xinhuanet.com/politics/leaders/2020-02/25/c_1125624969.htm
https://finance.sina.com.cn/money/future/agri/2020-02-24/doc-iimxxstf388...

..imagine trying to get a kiwi to toil in the fields. Be waiting a while for dinner!

Indeed! Migrants have basic human rights here, so I guess we cant replicate China's Labour cost

Just a blip. The Great Leader will surely fix it with a flick of his finger. Like how Trump fixed that tornado forecast with a sharpie.

I would not trust our present government to put the cat out. We now have a second case of coronavirus in Auckland who was accompanied by a planeload of people from Singapore - all now potential spreaders - and who then ( while in self isolation?) flew to Palmerston North and back to Auckland. Two more planeloads of spreaders. To top it off that person has children at two Auckland schools with combined rolls of 5000 students. The government's response to m. bovis has been far more draconian, with many perfectly sound animals culled on mere suspicion of being infected. Perhaps this is the best indication we have had of the government's priorities - dairy farming bad, tourism good. Except that it is dairying and farming in general that will have to keep on earning our export dollars while tourism languishes.

The government's passive management of this extremely highly contagious virus has been very poor.

A outbreak in NZ is waiting to happen.

I dont see the NZ Chinese party bringing anything constructive to the discussion. They seem more interested in trying to stop their farmer mates losing all their automatic weapons rights.

Very inconsistent: 1) NZ govt. really followed the China CCP strong ban on peoples movement, even at the cost of? China ambassador threat to NZ. 2) Check out all over this web site, tv news, govt news etc - NZ almost 100% relying their business with China right? - so in theory? China will save NZ like you said? or save Italy? save Japan? South Korea? - No No No matey...China is for Chinese & Chinese is for China.. even particularly shown by your comment (I'm just focus on you here, not the rest of NZ Chinese by the way) that despite you're here say to live.. your total allegiance is towards China/CCP - Do you have anything positive to say about NZ? support NZ action? .. I wonder, but please. I do understand that you won't be protesting as much.. if the govt. at the helm is Nat Corp.

I think you'll find the government doesn't see dairy as inherently bad - as some farmers and most Nat MPs would have you believe .
Its the intensive dairy farming in areas with inappropriate soils and climate, eg Canterbury plains - Willy.
Re tourism -Lets face it National would have opened the gates weeks ago .

As much as farming is presently the only economic gun firing, it is irrigated dairying in Canterbury that is maintaining production levels when all other areas are falling by the wayside due to either drought or flood. If it ain't broke , don't fix it.

Draining rivers dry and poisoning aquifers is breaking things.

You do understand this person is not an MP of any stripe, so not exactly sure how you blame the govt. What are you suggesting? Forced lockdown? Shoot anyone even remotely likely to have been around the virus? The responsibility lies fairly and squarely with this woman who obviously does not play with a straight bat. I wonder who she votes for.

it will be fine if the hypermedia could just calm down a bit...

Very interesting info Guy. Thank you. A stern reminder to take it easy on the stock purchases this autumn.

All of the indicators are that China is still in lockdown. Satellite readings on pollution and traffic congestion confirm this. Think about it - if it spread fast through Hubai, why not other areas of China. A virus does not respect regional boundaries. see this, in particular 18 minutes in for satelite shots. https://www.youtube.com/watch?v=uagDnjplkOE