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Saturday 21 May 2022

Woe, woe, woe – Christmas supply chain “chaos” warning, 2022 spillover

10th December 2021 By Bridget O'Connell | bridget@foodticker.co.nz | @foodtickernz

Food importers and exporters could close the year battling “significant supply chain chaos” with little respite in the new year, warns ASB.

Shipping costs have jumped by 500%, says ASB.

The bank’s Trade Disruptions December update painted a picture of widespread Covid-19 induced disruption – already painfully familiar to many of the country’s food and beverage businesses – peaking in the run up to Christmas.

“Industry insiders are telling us that fixing supply chain problems won’t be overnight and to expect issues well into 2022,” ASB international trade consultant Paul Gestro said.

“Shipping and logistics companies have also sounded a warning coming into Christmas as we hit the peak import season and also the dairy export season.

“We are told to expect some significant chaos before we get into 2022 and then right through summer.”

The report characterised 2021 as a year when freight and supply chain disruption became a global phenomenon, with shipping costs rising up to 500% on 2020, with the effects unevenly felt by exporters.

Export resilience in larger sectors is offsetting weaknesses in smaller sectors, it said.

ASB listed dairy, forestry and kiwifruit as the most resilient sectors, while seafood, wine and other horticultural produce such as apples were the most exposed to ongoing challenges. Meat was “somewhere in the middle,” it said.

On dairy, it said total volumes were largely resilient with whole milk powder volumes up 8% on 2019 pre-Covid levels as of October, although there had ben churn within some product categories with skim milk powder down 9%.

“Logistics woes represent a loss of potential rather than actual growth,” ASB said.

“Dairy prices up circa 10% on 2019, so helping to offset some potential revenue loss – buyer anxiety may be a driver of price increases and higher demand.”

Not so for apples, where volumes are down circa 10% on 2019 pre-Covid levels, and 13% on 2020, while prices remain broadly in line with the two previous seasons.

“Logistics challenges are working in tandem with seasonal worker shortages to constrain the apple supply, with similar trend seen in seafood and wine markets,” ASB said.

Looking ahead, ASB said the disruption in supply chain “may actually get worse before it gets better and rises to freight costs could continue, even though the bulk of the Covid-19 hit is behind us”.

“2021 and much of 2022 will be characterised by reduced reliability, container shortages, increased delays and higher costs from global supply chains.”

With increased freight costs, wages rising and other inputs also on the rise, New Zealand business were facing rising costs, which would ultimately be borne by consumers, the bank said.

ASB’s Trade Disruptions report can be read here.

 

 


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