Suez Canal attacks on shipping and Panama Canal low water levels force NZ meat exporters to find ingenious solutions

Meat companies are scrambling to maintain export sales amid shipping disruption they fear could last for months or even years.

One big exporter, Silver Fern Farms, is resorting to land bridges in both the Middle East and the Americas to get its goods to market. 

Another firm, ANZCO, is resigned to higher costs which cannot be offset by higher prices charged to end consumers. 

The main problem is that attacks on shipping in the Red Sea by Iran backed Houthi rebels in Yemen have dried up most commercial freight via the Suez Canal. 

An extra problem is low water levels in the Panama Canal, thanks to poor rainfall. 

One affected company is the export giant, Silver Fern Farms, which is a 50/50 joint venture between a farmers’ co-op and the Chinese firm Shanghai Maling.

“Global supply chains are being disrupted at both the Suez and Panama Canal,” says the company’s general manager of sales, Peter Robinson.

“At the Panama Canal, shipping companies now have a land bridge option, where ships drop cargo at one end to be transported by land and collected by another ship at the other end.”

Then there is the problem of the Houthi rebels, which Robinson says has forced  shipping to Europe to detour via the south coast of Africa to avoid attacks, adding at least 13 days to their voyages.

He says shipping companies are passing on the cost of re-routing to customers, resulting in additional costs.

There is also a problem for meat sales to Saudi Arabia, where the main port of Jeddah is on the Red Sea coast and is virtually inaccessible.

“Instead, ships are unloading meat at Dammam Port in the Persian Gulf, and carting containers inland an additional 1600km to their destinations,” Robinson says.

“Empty containers must then be returned to Dammam Port, adding further costs to importers.”

He adds the situation is being watched closely, and there are fears the problem could well drag on.

Another big company, ANZCO is also battling to make sure exports continue. 

“We’re pushing more of our product through Panama, and in some instances taking the long way around Africa to get product into the likes of UK and Europe,” says ANZCO’s general manager of sales and marketing, Rick Walker.

“So yes, it’s far from ideal, and it adds cost and time to our business and a layer of complexity that we would prefer not to have right now.”

Walker says there is still a demand for New Zealand product in these markets. 

“It’s a question of the extra time and the extra cost that affect the product when it finally gets to England or where ever,” he says.

“It’s very hard to pass these costs on. That’s always the challenge of being an exporter from New Zealand.  Essentially, the global market price is the market  price, and so exporters end up taking the brunt of these additional freight costs.”

Walker is declining to say what impact this will have on his company’s balance sheet – “that depends on whether disruptions last another month or another nine months.”

He adds the crisis is having little real impact on farmers’ deadlines for getting stock to meat processing plants because these schedules constantly being juggled anyway, “day to day and week to week”.

A third big meat company, Alliance, is saying less about its troubles.

Its general manager for supply chain and planning, Nigel Jones, says most chilled meat for the United Kingdom, including Easter volumes, was already being routed via Panama, and this has carried on.

"Frozen volumes are less sensitive to changes in transit times. These have generally been managed well with an allowance for additional lead time when scheduling," Jones says. 

But he admits to having similar problems as Silver Fern Farms in sending goods to Saudi Arabia.

And he points to a larger risk long term.

"The bigger risk is the potential impact upon container supply, as New Zealand temperature-controlled volumes reach their peak," he says. 

"This is because the longer transit effectively reduces the available container pool as equipment turn times extend.

"We continue to provide our suppliers with the best forecast information we have available to support their equipment supply planning.”

A smaller firm, Hamilton-based Greenlea, is less affected seasonally because it does not do lamb, only beef.

Total meat exports from New Zealand were worth $10.8 billion last year, according to the Meat Industry Association. The European Union took $1.2 billion, according to Ministry of Foreign Affairs and Trade figures from 2022. The UK took $464 million, up 11%. Collectively, the EU and UK took about a third of the value of meat sales made to China.