Jan 2009
Forget the speculation, watch the specifications
01 January 2009 12:40
John Hey
Any notion that Asia was immune to the credit crunch has been blown away in recent months as the region’s export-led economies suffer the “lag-effect” of the global slowdown. With many companies not paying end-of-year bonuses and the threat of layoffs becoming real, Asian consumers are entering this year in a very different frame of mind to 2008.
What the financial crisis means for Asia’s fresh produce markets is a subject of much speculation right now. On a global level, there is an argument the produce business is less exposed, since fruit and vegetables are part of the food chain and people will keep eating them. When it comes to Asia’s consumer markets, however, we must not forget that imported fruits are often a pricier purchase amid the plentiful locally-grown options, and that people tend to save money at the hint of any insecurity. Our survey of Asian importers produced a bleak prognosis for Chinese New Year, with talk of consumers trading down and tightening their belts, but then such gloom has become the norm in recent years.
Aside from consumer behaviour, the impact of the financial turmoil may well be felt more by the trade in terms of exchange rate volatility. The strengthening of the US dollar, while encumbering US exporters, is making Asia’s dollar-linked markets more attractive to Southern Hemisphere suppliers, especially as they explore alternatives to their recession-hit mainstays in the US and Europe. In China, where the yuan has actually appreciated against the US dollar, this is worrying some importers, who warn the market cannot afford to become a dumping ground at a time when demand appears to be slowing down.
Amid the gloom, however, we can expect to see some positives come out of the slowdown. Securing bank credit will grow tougher for Asian buyers, but there will be more caution on the part of importers, and fewer fly-by-nights and speculators ready to “take a punt”. This can only help market stability. Indeed, in many ways, the financial crisis will only serve to underline the core principles of doing business in the Asian markets; not least having sound business relationships and supplying product at the right time to the right specifications. Those exporters who send product speculatively that fails to make the grade can expect to get punished severely by these markets, as buyers and consumers become more selective in their purchasing.
Any notion that Asia was immune to the credit crunch has been blown away in recent months as the region’s export-led economies suffer the “lag-effect” of the global slowdown. With many companies not paying end-of-year bonuses and the threat of layoffs becoming real, Asian consumers are entering this year in a very different frame of mind to 2008.
What the financial crisis means for Asia’s fresh produce markets is a subject of much speculation right now. On a global level, there is an argument the produce business is less exposed, since fruit and vegetables are part of the food chain and people will keep eating them. When it comes to Asia’s consumer markets, however, we must not forget that imported fruits are often a pricier purchase amid the plentiful locally-grown options, and that people tend to save money at the hint of any insecurity. Our survey of Asian importers produced a bleak prognosis for Chinese New Year, with talk of consumers trading down and tightening their belts, but then such gloom has become the norm in recent years.
Aside from consumer behaviour, the impact of the financial turmoil may well be felt more by the trade in terms of exchange rate volatility. The strengthening of the US dollar, while encumbering US exporters, is making Asia’s dollar-linked markets more attractive to Southern Hemisphere suppliers, especially as they explore alternatives to their recession-hit mainstays in the US and Europe. In China, where the yuan has actually appreciated against the US dollar, this is worrying some importers, who warn the market cannot afford to become a dumping ground at a time when demand appears to be slowing down.
Amid the gloom, however, we can expect to see some positives come out of the slowdown. Securing bank credit will grow tougher for Asian buyers, but there will be more caution on the part of importers, and fewer fly-by-nights and speculators ready to “take a punt”. This can only help market stability. Indeed, in many ways, the financial crisis will only serve to underline the core principles of doing business in the Asian markets; not least having sound business relationships and supplying product at the right time to the right specifications. Those exporters who send product speculatively that fails to make the grade can expect to get punished severely by these markets, as buyers and consumers become more selective in their purchasing.
|