Tuesday, 03 March 2020 09:40

China supply chains could take months to clear

Written by  Staff Reporters
Mike Petersen. Mike Petersen.

Unlike some other exporters, Fonterra’s scheduling, logistics and delivery activities to all markets are largely operating as normal, the cooperative says.

This is despite the disruption to shipping and supply chains in China caused by the coronavirus update.

“We are keeping a close eye on the situation as it develops,” a spokesperson told Dairy News.

“At this time of the year, a high percentage of our FY(full year)20 supply is already contracted. Our sales teams are working with our customers to understand how coronavirus is impacting their businesses, which will give us an idea of how it may impact ours.

“We remain confident in our forecast farmgate milk price range of $7- $7.60/kgMS, and we have no reason to revise our earnings guidance of 15-25c per share.”

Meanwhile former special agricultural trade envoy Mike Petersen says it will probably take months for supply chains to and in China to clear.

Dairy products as mainly dried products are not so affected as perishable products such as some horticulture. And the lobster/crayfish industry has come to a halt.

“The supply chains in China are certainly empty.  There will be a big sucking sound of people wanting to import product into China once we see a bit of normality resumed,” he says.

“But that supply chain disruption is of real concern.  The displacement of cargo, the displacement of containers and displacement of ships will mean getting back to normal will take a few months rather than a few weeks.”

This is here for a lot longer than many people realise, he says.

China is letting food products through, he says, but many of the problems lie in the distribution getting it off the ships and off the wharves and in through China.

 “I don’t want to suggest that this is all hell in a handbasket because they are definitely trying to get the supply chains moving. But the amount of displacement that has already happened with ships and containers and product means that is going to be disrupted for a long period of time.

“It is going to take a few months for us to get back to normality.” 

He thinks the effects will be felt here much more severely than people realise.  A developed country like Italy now has coronavirus so it is no longer only a China problem.

“This is affecting a number of world markets.  That will add to the difficulties. I would say every product in and out of China is affected in some form.

“There is product that isn’t getting to its final destination at this stage.  It might still be on route so it could be held up in transit. There are ships that are anchored off China that can’t get onto their normal shipping routes.”

He says he doesn’t think any company wants to talk about it too much.  “But for a company that is trying to do the best that it can and divert product out of that area away from the disruption - and by and large they have probably done pretty well - but you are taking that influence of China out from the marketplace which has been a massive boost market prices in the last 12 months in particular for the last three years actually.”

We are focused on exports but import from China will also be disrupted, he says.

More like this

Mixed legacy

OPINION: You're never as good as when you're dead, and with due respect to Theo Spierings' family, the Hound can't let the death of the former Fonterra CEO pass without mentioning the parlous state he left Fonterra in when he exited in 2018 - having pocketed well north of $30 million over seven years.

$500k for chair

OPINION: Fonterra's chair will be paid nearly $500,000 if shareholders approve a proposal by the directors' remuneration committee.

So very '90s!

OPINION: In a to the 1990s, our old mates at Greenpeace continued their crusade against affordable food by abseiling down the side of Fonterra’s Te Rapa factory and unfurling a big banner.

Featured

New ag degrees at Massey

Changing skill demands and new job opportunities in the primary sector have prompted Massey University to create a new degree course and add a significant major into another in 2025.

The show is on!

It was bringing in a new Canterbury A&P Association (CAPA) show board, more in tune with the CAPA general committee, that has ensured that Christchurch will have a show this year, says CAPA general committee president Bryce Murray.

National

'Quite a journey'

Former Synlait chief executive Grant Watson says the past two years have been quite the journey.

DairyNZ levy to increase?

Retiring chair Jim van der Poel has used his final AGM to announce the intention to increase the DairyNZ farmer…

Former Fonterra CEO dies

Former Fonterra chief executive Theo Spierings passed away in the Netherlands over the weekend.

Machinery & Products

Milk Sustainability Centre launched

The recently announced Milk Sustainability Centre – a collaboration between global giant John Deere and milking and feed specialists De…

Data connection made easier

New Holland and Case IH are introducing new advancements in their precision technology stack to make farming easier and more…

» Latest Print Issues Online

Milking It

Feed from farmers

OPINION: The country's dairy farmers will now also have a hand in providing free lunch for schools.

Brighter future

OPINION: The abrupt departure of Synlait chief executive Grant Watson could be a sign that Chinese company Bright Dairy, the…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter