Demand for New Zealand exports remains despite the multitude of challenges facing the global economy.
These challenges range from international transport costs to demographic changes in key markets and high global food costs, RaboResearch general manager Stefan Vogel said.
Speaking at the New Zealand Institute of Primary Industry management, Vogel said the latest spike in international shipping costs has seen rates increase three to four times and volumes fall dramatically.
“We are not even seeing half of the vessels going through the [Suez] canal.”
Vogel said that price volatility will remain over the next six to eight months.
The root cause of the spike is the ongoing attacks by Houthi rebels on shipping traffic around the canal, used by a third of the world’s container ships
Most New Zealand exporters, however, do not use that route, with Asia being their prime destination, he said.
Vogel said the global economy is still being challenged by sluggish growth and high interest rates.
China’s GDP was reported as 5% for 2024 and consumers are trying to find value without spending more money. Meat, dairy, fruit and vegetables are the categories that have the biggest impact in New Zealand.
Overseas consumers are getting older, especially in China.
“The population has already reached its maximum. For the last two to three years, we are already seeing the population declining.”
It is difficult to encourage people to have more than one child because of the costs and logistics. Many people living in China’s major cities live in small, cramped apartments that do not have space for multiple children, he said.
On the positive side, the upper middle class has increased over the past 10 years and Vogel expects that growth to continue in categories such as meat, where demand remains.
“Some of the meat we are producing here, for example the beef side, can still benefit in China going forward.”
Chinese consumers are also becoming more conscious of health and sustainability and he believes beef exports can benefit from that.
For dairy, in recent months export volumes have struggled in the face of a surge in domestic growth.
“What you see in many parts of the world is the export countries – us here, the US, Europeans and the South Americans – the growth has not been very impressive. The Chinese growth over the last four or five years in terms of production was big, but it’s slowing down.
“They are grinding under margin pressure quite a bit as well. A lot of costs have gone up and they’re coming slowly down and in Asia we foresee the same thing – costs coming up quite a bit and the margins not very good.”
In the medium term, growth from the middle class, who have discretionary spending, is good news and it will be challenging for domestic suppliers to meet that demand, so demand for imports will continue.
Outside of Asia, consumers in Europe and the US are trading down because of high food prices and are choosing cheaper protein options than beef.
“Going forward with inflation finally coming down in many countries, slower than hoped but still coming down, the question is can we reverse that trend.
“The good news for us here in New Zealand is that there is demand for our products out there. Clearly there are challenges but wherever there are challenges, there are opportunities.
“I think we are not worse off than our competitors, on the contrary, I think we are in a good position and in that regard, I think we will overcome several of the challenges from the shipping side.
“We need to be focused on having a product that is desired in the market from the sustainability side of things, from a value proposition side of things and also, we need to be cost competitive.”
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