By Dominique Patton
BEIJING (Reuters) – The protracted lockdown in Shanghai, China’s financial hub, is slowing the nation’s normally booming meat trade, with stringent COVID-19 measures causing logistics logjams across the food industry in a sign of the broadening disruptions to business.
The challenge of moving food in and around Shanghai, whose residents are into a month-long stressful home isolation, highlights similar problems in many other Chinese cities as Beijing persists with its controversial zero-COVID strategy despite growing risks to its economy https://www.reuters.com/world/china/china-struggles-options-covid-threatens-economic-goals-2022-04-28.
China is the world’s biggest buyer of meat, bringing in more than 9 million tonnes last year, worth about $32 billion, and the financial hub with a thriving dining scene accounts for the largest chunk of imports.
Traders rely on Shanghai’s ideal location for distributing product around the country, but since an outbreak of COVID-19 cases forced a lockdown in the city at the end of March, moving chilled or frozen products has become a costly headache.
“Unloading containers is actually ok. The real issue is logistics out of the harbour, getting trucks and drivers to pick up the product,” said Soeren Tinggaard, Vice President at the Pinggu Retail & Foodservice business for pork processor Danish Crown.
Frequent COVID tests, lengthy quarantines and long clearance times to enter Shanghai have kept many drivers away, while fewer refrigerated trucks are available because of special licensing requirements.
IMPORTS PRESSURED
Other food products, including dairy and edible oils, have also been stuck in the Shanghai port, while beef imports into the city have dropped 23% year-on-year in March. Taken together with other cities under COVID-19 restrictions, the data suggests food exporters like Brazil, the United States and Australia are facing pressure on their trade with the world’s second-biggest economy.
Australian beef exports to China fell 10% year-on-year in March, when the lockdown had just started, while overall pork imports fell 70%.
Pork imports could plunge as much as 30% this year because of the logistics woes, compared with a previous estimate of 10%, said Pan Chenjun, senior analyst at Rabobank.
U.S. meat processor Tyson Foods (NYSE:TSN) said this week it has diverted meat shipments to other markets until the situation eases. Brazilian exporters have cancelled shipments and stopped booking new cargo, a source told Reuters.
The Shanghai port congestion has also impacted customers elsewhere in China.
“Since April 1, I haven’t got a single piece of meat,” said a Beijing-based trader who normally receives about 3 million yuan ($453,995.16) worth of beef each month from Shanghai.
A two-tonne shipment of chilled U.S. beef worth about 400,000 yuan that arrived more than a month ago is becoming a concern, said the trader.
“If it’s still there after 70 days, most of my customers won’t want it anymore,” he said, declining to be identified because of the sensitivity of speaking out about COVID measures.
‘NEW CHALLENGE’ EVERYDAY
For now, the sharply weaker consumption due to COVID restrictions is keeping a lid on prices, though it could become a problem the longer the lockdowns persist.
“All these logistics issues are adding cost into the supply chain, which ultimately leads to food inflation,” said Andrew Cox, Singapore-based general manager of international markets at trade body Meat and Livestock Australia.
Some traders are rerouting product to other ports in China, but deliveries are slow and even then, costs are mounting as cities roll out their own stepped-up COVID protocols.
For trucks arriving into Beijing, product goes to designated central warehouses where it is tested for COVID-19. Once released, some importers have been told they must hold it for up to 14 days and carry out more COVID tests.
Tianjin requires COVID tests on all chilled and frozen foods, including one test on the inside of the packaging, said another Beijing importer. For a bag of Wagyu beef worth about 2,000 yuan, that’s a lot of money down the drain.
“Every day brings a new challenge for the F&B industry,” he said.
($1 = 6.4408 Chinese yuan renminbi)
($1 = 6.6080 Chinese yuan renminbi)
Source : Reuters