COVID-19 Agricultural Trade Impact Analysis from DAWE
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.
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 – scroll down for more details under the ‘International freight support measures’ heading.
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. 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, fertilisers, 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.
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 https://www.agriculture.gov.au/coronavirus/export
Audits with AQIS
Due to the current COVID-19 pandemic, some scheduled audits will be delayed.
You will be notified by the Department if you were to be audited pre-season.
Audits will be conducted by a local state auditor, and will not be travelling from interstate.
The Department is preparing alternative audit regimes where access is not possible to farms. This may include audits via video conference.
International Freight Assistance Mechanism (IFAM)
The Federal Government is providing support to the agriculture sector to deal with current air freight constraints. This includes $110 million to ensure air freight capacity remains open for critical markets. An International Freight Coordinator-General has been appointed to oversee this task and work with airlines and freight forwarders. You can read the fact sheet here.
If you rely on air freight to export high-value horticultural products, please complete this online form to inform the Coordinator-General of the key ports of demand for time sensitive air freight, or call 02 6272 2444. Please note that if you submitted an EOI before 16 April 2020, you will need to resubmit the form with additional information. This will inform which air freight routes are prioritised by the IFAM. As of 23 April, over 560 Australian businesses have registered their interest, and agreements for 55 freight flights have been secured.
It is strongly advised to complete this as soon as possible to be considered as part of the early consolidated flights and benefit from the subsidisation available. Whilst the IFAM will initially only focus on the key markets of China, Japan, Hong Kong, Singapore and the UAE, please still register if you have other target markets, as this list may be expanded if there is sufficient demand and commercial opportunity.
How will the mechanism work?
Six freight forwarders and nine air freight service providers have now been appointed.
Australian exporters impacted by the COVID-19 crisis will now have access to business-saving loans between $250,000 and $50 million under a new $500 million capital facility to be administered by Export Finance Australia.
The new COVID-19 Export Capital Facility will target loans to established and previously profitable exporters who, due to COVID-19, are unable to gain finance from commercial sources. For more information view the fact sheet or the media release from Senator the Hon Simon Birmingham.
The COVID-19 pandemic is disrupting business around the globe to differing degrees, and the situation is changing daily. Unchanged: The COVID-19 pandemic is disrupting business around the globe to differing degrees, and the situation is changing daily.
Exporters are advised to keep abreast of the situation in various locations by using the links on this web page, relying on trusted partners in local markets, or by contacting Austrade on 13 28 78 and following the prompts for ‘Export enquiries’ (within Australia). Visit the page here: COVID-19 updates for exporters
Trade access and cost of freight
China is continuing to remove travel and business restrictions that are impacting positively on Australian exports. E-commerce within China has increased exponentially (e-commerce platforms have grown 56 per cent, week-on-week) and appears to be the new normal in terms of retail sales, including food.
Some commodity groups are chartering flights to export produce. Austrade can assist with linking exporters with these initiatives. Please contact Pru Gordon (email@example.com) for the contact details of the relevant Austrade person.
Austrade and DFAT 12 Free Trade Agreements (FTAs) Digital Seminars
Austrade and DFAT are hosting a series of 12 Free Trade Agreements (FTAs) Digital Seminars. The next seminar, titled ‘Navigating the Export Journey’ will take place on Wednesday 10 June at 10.30am Adelaide time, and will feature The Hon Andrew Gee MP, Minister Assisting the Minister for Trade and Investment and Dianne Tipping, Chair Export Council of Australia speaking on getting exporters started, including things to consider and where to go for help. View more information and register here. Future webinars will offer information aimed at building the export journey, capturing FTA benefits and recognising market and sector opportunities.
Australia’s Bureau of Agricultural and Resource Economics and Science (ABARES)
Analysis of Australia’s food security and the COVID-19 pandemic
The latest report by ABARES has confirmed Australia has one of the most secure food supplies in the world and is not at risk because of COVID-19. Australia ranks in the top 10% of countries under the Global Food Security Index defined by the World Food Summit. The index measures 34 criteria covering affordability, availability, quality and safety. You can view the ABARES Analysis of Australia’s food security and the COVID-19 pandemic here, and media release here.
On 22 April 2020, PMA A-NZ hosted a webinar about the impact of COVID-19 on trade opportunities for the fresh produce sector, along with Escavox, Hort Innovation and the Australian Fresh Produce Alliance. See it here. You can also view their list of resources here.
Shipping routes and refrigerated containers
Citrus Australia has sought feedback and information from the main ports and shipping lines which handle citrus exports. The following is a summary of the responses to date:
The number of ‘blank sailings’ i.e. scheduled vessels that did not depart on a route due to inadequate cargo has decreased from earlier in the year where congestion in Hong Kong and China mainland caused significant disruption.
The availability of refrigerated containers has eased and the trend is an ongoing improvement in numbers of returning refrigerated containers from China.
Disruptions in ports is expected to be ongoing as governments transition through phases of their responses which will impact staff availability which in turn creates congestion and effects efficiency.
Citrus Australia will endeavour to update industry as information on issues at post come to hand.
Citrus Australia’s advice remains that forecasting your container requirements with shipping lines well in advance is best practice.
Additional air freight capacity with Qantas
To support Australian exporters, Qantas is offering air freight capacity on repatriation international passenger services to a limited number of global cities, from 9 April 2020. This will give Australian producers another way to obtain valuable inputs for their businesses. The return flights to Australia will bring in vital medicines, medical supplies and equipment to support Australia’s response to the COVID-19 pandemic. The best way to access these flights is to utilise your standard freight operations channels, including your freight forwarder.
Department of State Development, Manufacturing Infrastructure and Planning (DSDMIP)
Supply update 17 April
Advice for businesses requiring small volumes of PPE is to buy from local suppliers if possible. For larger volumes, businesses are encouraged to go to the government’s online form so they can be matched with suppliers.
DSDMIP has found the glyphosate supply issue to be non-critical at this stage.
Trade and Investment Queensland
Update 17 April
In China, port activity is increasing, only down 10% from this time last year. Rail volumes have increased. Overall, freight movements are returning to normal.
In Singapore and Malaysia, still struggling with freight costs from Australia, and they are concerned about food security as a result.
Malaysia has food security issues and have a food supply problem, so if freight costs can be lowered there is an opportunity for Queensland growers to meet this demand.
Amendments to safeguard primary producer access to weapons
An amendment has been made to the health directive on weapons so that primary producers can access firearms, ammunition and associated services to manage their properties by producing a Queensland Firearms Licence bearing any of a number of licence codes, including recreational user endorsements. Find out more about the requirements here.
Department of Agriculture and Fisheries
The first ‘Freight and Export Markets’ bulletin was circulated last week. Bulletins will updated on a regular basis and will be available from here. You can view the first bulletin printed 17 April here.
Seafreight update from the Port of Brisbane
Supply of refrigerated containers has been restricted through March, but is expected to return to normal as ships come back online.
The port is operating at close to normal levels, with exports mostly unaffected.
Airfreight update from Brisbane Airport Corporation (BAC)
There is an interest from Air Canada to operate freight services to Brisbane which is being explored.
BAC supports opening the border with New Zealand, and is collaborating with NZ counterparts on that.
95% of flights have been lost, falling from 115 flights per week to around 10 flights per week.
All industry interested in freight should provide their airfreight needs to the Federal Government to ensure they are able to facilitate critical decisions in consultation with airlines.
Airlines are interested in freight services from Brisbane Airport if there is demand. There is also the possibility of freight out of regional airports like Wellcamp or Cairns.
Export Fundamentals Program
On 29 April 2020, the State Government launched a new Export Fundamentals Program to help emerging and existing exporters successfully market their products and services internationally. The program – designed by the Department for Trade and Investment – will be delivered in partnership with the national employer association and provider of trade and export development services, the Australian Industry Group (Ai Group) and South Australian firm Hydra Consulting.
The training program will support South Australian exporters by giving them the tools, connections and confidence to successfully move into international markets. Further information about the program and registration links for upcoming sessions in May can be found here. View the media release here.
Airfreight out of Adelaide
There is opportunity through IFAM to consider proposals for flights direct from Adelaide, and the South Australian Government is working on this with freight forwarders and the SA Freight Council. Please indicate your interest and give the details of your potential air freight needs directly to the TradeStart adviser for your region, so the Government can make sure these are considered if any ex-Adelaide options can ultimately be facilitated.
Exporters interested in an airfreight consolidation option out of Adelaide should speak with Becky Houston, Market Development Manager, Department for Trade and Investment at firstname.lastname@example.org or 0407 734 052.
Please keep close contact with your existing freight forwarders, as they too will become aware of air freight opportunities. Businesses should continue to look at options via other cities (Melbourne is the most common), but consider the ex-Adelaide option when and if it becomes available. At this stage, the South Australian Government is not considering subsidising road freight to other states.
To keep up to date with the latest information on support for South Australian exporters, visit www.dti.sa.gov.au.
Department of Primary Industries and Regional Development (DPIRD)
Updates from DPIRD
17 April 2020 – WA government has put forward a short term support arrangement for airfreight into Singapore.
3 flights per week over 4 weeks will be chartered to Singapore with a subsidy of $1.05/kg offered.
Up to 30% of cargo capacity is available (a max of 45 tonnes per week) to be filled by agri-food products.
Please contact your freight forwarder to confirm your interest and to find out what air freight capacity is available and the rate.
If you have any general questions or issues that need to be raised about air freight please email email@example.com
Updates from the Minister for Agriculture and Food
27 March 2020 – The Minister advised that WA is experiencing some shortages in fertilisers and pre-seeding chemical inputs, but this appears to be the result of lots of supply being sent east when the drought broke while many factories in China went into lockdown. Factories in China are rebooting and, if all goes well, supplies will be back to normal in the next couple of weeks. Some farmers may want to reconsider substituting later varieties for early planting strains to maximise chances that pre-seeding chemicals will be available. More updates here.
25 March 2020 – Freight and cargo shipping is continuing, however cancellation of passenger flights has reduced avenues into international markets, which impacts exports of fresh produce and premium products. The Minister is looking into using under utilised planes to continue to supply international markets by air. Read the full announcement here.