Guy Trafford sees widespread support for the Government's coronavirus handling, and watches the market responses in the food sector which now consider the China focus an advantage

Talking to people and reading responses online, the majority of people are in support of the Government’s decision to effectively close the borders to all but those foolhardy enough to want to do a two-week isolation stint.

However, it was surprising the number who still think it is an over-reaction and the ‘costs’ to jobs and the economy are too great. It is a classic case of “type 1 versus type 2 error”. I.e. The risk of being wrong for taking the conservative route and locking down the country has a better outcome than the risk of being wrong by leaving the borders open for the infection to come in and run rampant and perhaps cause numerous deaths.

It appears the UK government has adopted the other route and has gone for the “herd immunity option” as they perceived the cost to the economy as too great. Although, they do seem to be having second thoughts about this policy especially as the rest of the world seems to have adopted the other route and the UK economy is going to be hit along with all the rest of us.

The New Zealand decision to seemingly follow the Taiwan approach probably provides our best chance of coming through, what has turned into an international disaster for all countries, in reasonable shape. The ability of the government to be able to borrow to mitigate some of the worst impacts (assuming the recent announcement does what we assume it will) is a testament to the current and previous Government’s sane spending policies (with a large dose of 20-20 hindsight).

The other advantage New Zealand has over most other countries is our food production sectors, all of them. Despite the awaking of the Chinese economy even the food sectors are going to experience a downturn as all countries ability to pay are going to be reduced.

China might be up and running but who is in a position to buy their products? Much is being made of China’s poor economic and manufacturing performance over the January and February period, that should have come as no surprise. It is how they perform from March going forward that is of far more interest. This is what is critical to the food sectors performance. If even moderately successful, the food sectors should still provide a functioning economy when tourism has collapsed.

One concern I have is the supposed deal done (pre Covid-19) between China and the USA for China to purchase more agricultural products from the USA. One of the fall-outs of the Chinese governments response to the virus has been their more overt presence and control over society. Currently New Zealand has been benefiting from some of the peoples will to purchase our products.  Whether this will change in the future with a greater government presence in purchasing orders only remains to be seen.

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Currently meat schedules for sheep have remained relatively unchanged for the last couple of weeks and while beef has had a few slips it is still comparable to last seasons prices. Perhaps a little surprising are the prices being paid at saleyards. At the moment the dry conditions are having a greater impact than the threats from Covid-19 as the moment some moisture appears prices do firm. However, venison is showing what potential for falls exist with another -30 cents coming off one processors schedule. With the bulk of venison going into the EU and USA it shows the importance of the market spread including China in the mix.

At the moment, of all the export food sectors, the high value seafoods and fresh horticulture are most at risk with their reliance upon air freight. Given the 30% layoffs by AirNZ and their huge reduction in flights, it maybe that the Government could consider providing some subsidising to them for straight freight flights into China, Japan and wherever the markets exist. It could be a way to assist multiple sectors. At least fuel is cheap at the moment.