The COVID−19 pandemic is placing substantial stress on logistic and supply chain networks, altering product demand and disrupting agricultural trade. Most commodities are affected, however the impact varies by market and commodity. Governments around the world are moving to support farmers and supply chains to facilitate trade and ensure food security. While we expect the underlying demand for agricultural products to remain stable and production to be largely unaffected, prices will likely soften, particularly for products typically sold into the food-service sector.
Logistic and supply chains
COVID-19 is continuing to place substantial stress on logistics networks. This stress is manifesting in serious disruptions to air-freight, some disruption to sea-freight and intra-national freight issues associated with restricted movement of people and goods.
Products relying on air-freight have been most affected in the immediate term. For many routes, air-freight is either not available or has seen significant increases in the service cost.
The Australian Government has announced the $110 million International Freight Assistance Mechanism (IFAM) to help high-value, perishable, air-freighted agricultural products reach key overseas markets.
Sea-freight is gradually returning to normal as the back-log of containers is cleared from ports in China. Despite this, transhipments through China and Singapore are reportedly experiencing delays and the availability of refrigerated containers remains a concern.
As lock-down measures continue to be rolled out, labour shortages and document processing are likely to cause delays at some ports, particularly in countries where logistics networks normally exhibit fragility. The Federal Department of Agriculture, Water and the Environment (DAWE) is working with trading partners to ensure Australian goods can continue to reach markets, such as seeking acceptance of e-Cert to reduce paper certification requirements.
Agricultural exports are underpinned by imports, with imported inputs accounting for around 10% of the total gross value of Australian exports. China is Australia’s most significant supplier of intermediate inputs, followed by the United States of America. For farmers, key imported inputs include chemicals, fertilizers, stockfeed and machinery. For processors, inputs include packaging and other component ingredients and inputs.
With China recovering from the COVID−19 outbreak, the risk of disruption to supplies of fertilizers and agvet chemicals is substantially reduced.
Efforts by countries to combat COVID−19 by reducing industrial activity have the potential to reduce the availability of packaging and processing inputs in some instances. These issues are being addressed on a case-by-case basis and no significant supply disruptions have been experienced to-date.
Demand for agricultural products
Restrictions on restaurant dining, congregating in groups and travel have significantly reduced the demand for premium agricultural products. This was initially felt in China, however restrictions of this type are common across all of Australia’s major markets. The impact of COVID-19 is easing in China, however prices for Australian exports of live sea-food, wine and sheep meat remain well below pre-outbreak levels.
Some traders are attempting to take advantage of increased demand from the retail sector by diverting product away for the restaurant sector and into retail. Aside from lower prices, there are challenges associated with packaging, labelling, suitability of the product and securing connections with retail markets.
Sales of food products through online platforms and food delivery services are reporting notable increases in sales volumes, some of these increases are expected to be maintained even after the impact of COVID-19 has eased.
ABARES is currently drafting a research paper on the broad impacts of COVID-19 on Australian agriculture, forestry and fisheries, for release before the end of April.
Foreign governments are looking for ways to support farmers and ensure domestic supply chain continuity. DAWE continues to monitor these measures, in particular where they have the potential to impact upon Australia’s export markets.
Food security and the availability of farm labour have been a concern in some trading partners. The severity of the food security challenge ranges between countries, from minor issues, such as the need to reassure the public, to more serious concerns, such as the threat of food and water shortages. In developed-country agricultural exporters, such as Australia, the EU and USA, producers are concerned about their ability to source migrant labour. In developing countries, such as India, movement restrictions have reduced the availability of farm labour, even where agriculture has been designated as an essential service.
DAWE has been focused on the systems and processes that keep trade moving into and out of Australia – more information on Temporary changes to importing country requirements, Food safety controls and standards, Export verification, Approved arrangements and Approved Islamic Organisations (AIOs) can be found at www.agriculture.gov.au/coronavirus/export
You can read the Department of Agriculture, Water, and Environment reports here: