COVID_19 has proved challening for the agri-food sector - NZIER Insight 93

06 October 2020

Media release
New Zealand Institute of Economic Research (Inc)
Media Release, 6 October 2020
For immediate release

COVID-19 has proved challenging for the agri-food sector

From pasture to plate, farms and businesses in the agri-food sector have reported feeling squeezed between rising costs and lower prices.

This finding comes from a new survey of the agri-food sector reported by NZIER.

Survey results from the sector were compared to the Quarterly Survey of Business Opinion (QSBO), a long-term survey run by NZIER. Farms and agri-food businesses were noticeably more negative about their costs and revenues than the rest of the economy. The net opinion in the sector was over four times as negative as the result from the QSBO.

Principal Economist Dr Bill Kaye-Blake explained, ‘We think demand for food was lower during lockdown because of restaurant closures and fewer tourists. Farmers can’t just turn their production off and on, however. They end up producing more than the market can absorb so prices fall.’

The survey also pointed to perceived problems with supply chains. A majority of respondents said that the performance of their supply chains got worse during the pandemic and lockdown. They also pointed to issues with logistics and transport.

Non-farmers provide flexibility to the sector

The survey results found differences between farms and non-farm businesses in the sector. The non-farm businesses reported lower negative impacts and a better ability to adapt. More non-farm businesses reported higher demand for their products, for example.

‘This result shows that the processing and distribution parts of the food system help make it resilient to shocks like COVD-19,’ said Kaye-Blake.

Uncertainty about a ‘new normal’ for the sector

The survey looked at the future for the sector. A majority of respondents said there would be a ‘new normal’, with more reliance on technology and more focus on the domestic market. Other respondents suggested that the situation might not be resolved within the next two years.

If the respondents are correct, the sector will continue to face some tough times for a while. We may see higher consumer prices and changes to the sector, and possibly calls for the government to provide targeted support.

Survey an international collaboration

To explore the impacts of COVID-19 on the agri-food sector, NZIER collaborated with an Australia-New Zealand team, including AgResearch and The University of Queensland. NZIER led an online survey of farms and businesses across the two countries. Comparative results are expected to be published later this year.

For further information please contact:
Dr Bill Kaye-Blake
Principal Economist, 027 362 0743

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