Planned comeback for US perishables exporters another casualty of the virus

© Jim Cottingham

This was supposed to be the comeback year for US perishables exporters – during the trade war with China many saw their traffic to the biggest international market slump as competitors took advantage of the high retail price of US lobsters, soybeans and other perishables in China.

The truce, signed last autumn, and China’s pledge to import more promised a chance to regain lost ground and possibly even gain some more.

In addition to removing tariffs on a broad list of US items, China pledged to make additional purchases worth $200bn over two years, with $32bn earmarked for US agriculture goods.

However, in recent months prospects have dimmed increasingly: in January, US agriculture exports to China were up 107% year on year, but 23% lower than in October.

The Covid-19 pandemic has changed the pictured drastically, with measures imposed by China to combat the spread of the virus choking imports.

Now, as Chinese consumers are emerging from lockdown, US exporters are faced with new hurdles created by the virus. The implosion of commercial flights between the two countries has decimated capacity and driven up rates to prohibitive levels, and the strength of the US currency is undermining the competitiveness of its seafood, fruit and vegetables in international markets.

Chris Connell, senior vice-president North America of Commodity Forwarders, a subsidiary of Kuehne + Nagel, noted that a number of perishables could not absorb the current rates demanded by airlines on their skeleton network operations. Consumers are not going to pay to absorb these and will opt for alternative fruits and vegetables, he said.

Only meat exports to China appear impervious to the higher rates, which observers attribute to the devastating impact of African swine fever on Chinese pig stocks that has fuelled rising imports of pork, beef and chicken from a host of suppliers, including the US.

Some types of produce, such as broccoli or grapes, could arguably move on expedited ocean services when their volumes are strong enough, Mr Connell said. However, they still faced an even larger obstacle than transport costs: “it’s more the strength of the dollar,” he explained.

It has soared in recent weeks and is at an 18-year high against the Australian dollar, while sterling, meanwhile, has sunk to its lowest level against the US dollar in 35 years. But the dollar’s rise has been less steep against the Chinese currency. It reached Rmb7.08 for $1 today, up from Rmb6.92 in early January.

Still, competitors can now offer Chinese buyers their perishables at significantly lower prices and Brazil, which took over much of China’s soybean imports that used to come from the US, has seen its currency plunge sharply recently.

With a value of $20bn, soy beans were the biggest US export commodity in the food, feeds and beverages category last year, alongside meat and poultry (also worth $20bn), followed by corn ($9bn). Overall this category saw US exports worth $131bn in 2019, 8% of the nation’s overall exported goods value.

Faced with bleak prospects in overseas markets, US growers, packers and shippers will pivot to the domestic market this year, Mr Connell predicts. Even cherries, which usually command high airfreight rates, will be marketed more to the US, he says.

For airlines, which look to a traditional cherry bonanza of lucrative outbound loads from the US between May and July, this is more bad news.

Mercifully though, for growers and shippers, the US market offers a silver lining in the gloom of the Covid-19 pandemic: domestic sales of fresh produce were up 29.7% in the week ended 22 March.