New Zealand's agricultural sector is facing potential hurdles due to current geopolitical unrest in the Red Sea region. Stefan Vogel, General Manager at RaboResearch, joins REX host Dom George to explain the complexities arising from the crisis and how they affect New Zealand's trade routes and economy.
A key point Vogel touches upon is the reliance of New Zealand on maritime routes for its imports and exports.
"As New Zealand, we're bringing in a lot of goods," he says.
"Being an island, it basically all comes on a boat in or, if we're exporting, a lot goes out on a boat as well."
He describes the disruptions caused by Houthi rebels attacking vessels, compelling shipping companies to detour around the Cape of Good Hope, thus lengthening transit times and inflating shipping costs. Vogel articulates the domino effect of these disruptions, "and if you reduce the capacity of shipping it means the rates go up."
Vogel also explores the broader economic implications for New Zealand, hinting at the potential for increased import prices and competitiveness of New Zealand's exports in Asian markets. However, he warns of the risks, including "higher inflation and prioritization of more profitable shipping routes by carriers at the expense of service to New Zealand."
In discussing the impact on New Zealand's economy, Vogel notes, "We're fighting inflation for quite a while here in New Zealand, which on that side also means maybe inflation does not come down as quickly as we hope and that's kind of impacting people in their day to day."
He also highlights the effects on New Zealand's exports, stating that "a lot of the volumes go into the Asian markets. That's good news for us on the one side because we don't have to go through that Suez Canal."
The conversation further delves into the nuances of how different types of fertilisers imported into New Zealand could be affected differently, depending on their origin and the trade routes they typically take.
Vogel points out that while some fertiliser prices have decreased globally compared to previous years, "we need to keep a close eye on those shipping issues because if you're dependent on getting everything in by boat and getting most of your exportable goods out by boat, you really want to make sure that you understand those trade flows and the disruptions."
Listen to the full chat between Stefan Vogel and Dominic George above.