Coronavirus gives ‘body blow’ to exporters, worries consumers
The coronavirus COVID-19 is changing consumer demand in affected global regions and choking exports of U.S. produce to Asian markets.
The United Fresh Produce Association is assuring members its convention and expo, scheduled for June 16-19 in San Diego, Calif., is still on.
“We are closely following government advice, which has not recommended restricting travel or any limitations on meetings in the United States,” according to a United Fresh e-mail on March 3. “At this time, United Fresh is not considering canceling any meetings without direct recommendation by government health authorities.”
The Natural Products Expo West, scheduled for March 3-7 in Anaheim, Calif., was postponed indefinitely.
United Fresh has a dedicated web page for industry resources on the Coronavirus.
Worry spreading
While less than 200 people in the U.S. have been diagnosed with the coronavirus, more than 96,000 have been sickened worldwide this year, including more than 80,000 in China, more than 6,000 in South Korea and more than 3,000 in both Iran and Italy.
One Northwest exporter said U.S. produce exports to Asia have been disrupted because of the outbreak.
“It is (like) a body blow you receive every day, and we make an adjustment accordingly,” said Koji Suzuki, president of exporter Jaspo Inc., Seattle, Wash. “You have to be vigilant and try to react to the changes.”
Equipment shortages and schedule changes are driving ocean transportation charges higher, with some carriers asking for $1,000 to $2,000 increases on rates for refrigerated containers to Asia destinations, he said.
Suzuki said the disruption could last for a while.
“At this point, there’s a sudden lack of demand, especially in China,” he said.
Since the outbreak of the coronavirus in China and the dramatic fall in factory output in some regions, shipping lines have canceled 110 sailings from China, according to Peter Friedman, executive director of the Agriculture Transportation Coalition.
That means those ships can’t be used for exports back to China.
“That means that our export cargo sits on the dock and is awaiting the precious few slots that are available on the precious few voyages that are continuing to China,” he said.
Friedman said some rates to Asia are as much as $3,200 per container higher than standard rates before the outbreak.
Freight should start to loosen up as factories in China resume their production and exports to the U.S., but Friedman offered no firm timeline for that.
One exporter, speaking on background, said some ocean carriers for a time rejected any bookings to Shanghai or other destinations in China. However, those carriers are again starting to take bookings and that is creating some anticipation of improving container availability.
Hotspot
A hotspot for the virus in the U.S, Seattle’s King County has seen 32 cases of coronavirus and 9 deaths as of March 5.
Suzuki said he took a flight from Seattle to California March 4 and noticed empty seats on the airplane and less traffic on the roads in Seattle.
One bright spot for suppliers could be greater demand from retailers, he said, noting reports of crowds at Costco.
Staple items like hand sanitizers and toilet paper have been flying off the shelves in some cities, along with shelf-stable food items, various media reports said.
“It seems pretty obvious that right now the coronavirus is motivating some shoppers toward pantry-loading purchase behavior,” said Steve Lutz, senior vice president of insights and innovation for Category Partners.
The behavior, he said, is more focused on staples and non-perishables. Lutz said that outside of a few produce items such as potatoes, onions and apples, the perishable nature of fruits and vegetables will likely limit the immediate effect of this behavioral shift.
“(One) potential downside is if a coronavirus outbreak becomes serious enough to discourage consumers from making regular trips to the supermarket, perishable purchases will suffer as store trips/opportunities will drop,” Lutz said. “Consumers will instead dig into their pantry items.”
Chinese imports
Jim Provost, owner of I Love Produce, West Grove, Pa., said March 5 that the company’s garlic facilities in China are starting to resume operations after shutting down for the Chinese New Year celebrations in late January and subsequent quarantine precautions after that.
Staffing is still only about 50% of normal, he said.
“It was very unusual (situation) in that the entire world’s supply of garlic was disrupted,” he said.
China produces about 80% of the world’s garlic, and current prices of near $50 per case for peeled garlic are about 50% higher compared with pre-Chinese New Year trading.
Provost said it may take several weeks before supply and demand return to normal.
Provost said all the company’s garlic and ginger is produced in Shandong Province, which is more than 500 miles from the virus epicenter in Wuhan.
The Centers for Disease Control and Prevention has said there is no danger of spreading the virus with any product shipped from China, he noted; the coronavirus is transferred person to person via water droplets.
“(The) coronavirus only lasts for a few days on objects and our products take five weeks to reach us from China,” he said.
From a U.S. demand perspective, Provost said he feels as if there has been a little less business on the foodservice side.
“That means people may not be eating out as much but we’re also seeing a little bit more demand on the retail side, so people are buying garlic and they’re eating garlic,” he said.
Feedback from some wholesalers indicates that restaurants in Asian communities have seen declining numbers with increased publicity about the virus, said Robert Verloop, chief operating officer and general manager of Coastline Family Farms, Salinas, Calif.
Greater awareness of the virus in some parts of the U.S. seems to have caused more people to be cautious about eating out in general, Verloop said.
“You starting to see people doing pantry hoarding, taking shelf-stable items, and loading those up in their homes,” he said. “As a result, fresh fruits and vegetables are suffering, and so what started in more of an ethnic area now is more widespread,” he said, noting that his observations are based on feedback from customers.
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