© Reuters. FILE PHOTO: Police and security personnel in protective suits stand outside cordoned food stores following the outbreak of the coronavirus disease (COVID-19) in Shanghai, China, March 29, 2022. REUTERS/Ali Song
By Dominic Patton
BEIJING (Reuters) – A prolonged shutdown in Shanghai, China’s financial hub, has slowed the country’s normally booming meat trade, as strict COVID-19 measures create logistical bottlenecks across the food industry in a sign of widening disruptions to business.
The challenge of transporting food in and around Shanghai, whose residents have been living in stressful home isolation for a month, highlights similar problems in many other Chinese cities as Beijing continues its controversial COVID-free strategy despite mounting 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 largest buyer of meat, bringing in more than 9 million tons last year, worth about $32 billion, and the financial hub with a thriving dining scene accounts for the largest portion of the imports.
Merchants rely on Shanghai’s ideal location to distribute products across the country, but since the outbreak of COVID-19 cases that forced a lockdown in the city at the end of March, transporting refrigerated or frozen products has become a costly problem.
“Unloading the containers is actually OK. The real problem is the logistics out of the port, getting the trucks and drivers in to pick up the product,” said Soeren Tinggaard, vice president at Pinggu Retail & Foodservice Business for Danish Crown pork processor.
Frequent COVID tests, prolonged quarantines and long clearance times to enter Shanghai have turned off many drivers, while fewer refrigerated trucks are available due to special licensing requirements.
Imports are pressed
Other food products, including dairy products and edible oils, also stopped at the Shanghai port, while beef imports into the city fell 23% year-on-year in March. Looking at other cities subject to COVID-19 restrictions, the data suggests that food exporters such as Brazil, the United States and Australia are facing pressures on their trade with the world’s second largest economy.
Australian beef exports to China fell 10% year on year in March, when the lockdown had just begun, while overall pork imports fell 70%.
Pan Chenjun, a senior analyst at Rabobank, said pork imports could fall by as much as 30% this year due to logistical problems, compared to a previous estimate of 10%.
American Meat Processor Tyson Foods (NYSE 🙂 said this week that it is diverting shipments of meat to other markets until the situation calms. A source told Reuters that Brazilian exporters have canceled shipments and stopped booking new shipments.
Shanghai port congestion has also affected customers elsewhere in China.
A Beijing-based trader said he usually received about 3 million yuan ($453,995.16) worth of beef every month from Shanghai since April 1.
The trader said a two-ton shipment of US chilled beef worth about 400,000 yuan that arrived more than a month ago has become a concern.
“If it’s still there after 70 days, most of my clients won’t want it anymore,” he said, declining to be identified due to the sensitivity of talking about COVID measures.
A new challenge every day
For now, sharply weak consumption due to COVID restrictions is limiting prices, although it could become an issue the longer the lockdowns continue.
“All of these logistical issues are adding cost to the supply chain, ultimately driving food price inflation,” said Andrew Cox, Singapore-based general manager of international markets at the Australian Meat and Livestock Authority.
Some merchants are forwarding the product to other ports in China, but deliveries are slow and even then, costs escalate as cities roll out their own COVID protocols.
For trucks arriving in Beijing, the product goes to designated central warehouses where it is tested for COVID-19. Once released, some importers were told they must keep it for up to 14 days and do more COVID tests.
Another importer in Beijing said Tianjin requires COVID tests on all refrigerated and frozen foods, including one test on the inside of the package. For a bag of wagyu meat worth around 2,000 yuan, that’s a lot of money.
“Every day brings with it a new challenge for the food and beverage industry,” he said.
(dollar = 6.4408 renminbi)
(dollar = 6.6080 Chinese yuan)