Agrifood Sector Outlook

Q: Hi Andrew, with 15+ years of credit risk experience in the region, may we have your thoughts on the agrifood sector?

A: In our region, while population growth remains steady, people now have more disposable income compared to a decade or two ago. People in this region now also focus on the quality of agrifoods (e.g. organic diet) and lifestyle (e.g. wine consumption). We are seeing a higher demand for agricultural products within the region. In addition to the traditional domestic supply of agrifood, rapid development of global agrifood supply chain and online platform also serve as a big boost to the agrifood industry.  E-commerce is no longer dominated by MNCs, nowadays medium and small agriculture-growers can easily sell their goods to global customers. 

Q: Are you seeing any trends in delayed or non-payments in this sector?

A: To grow business, we are observing more suppliers gradually shift from domestic focus to exporting within the region (e.g. more wine, dairy exports to other Asia countries). To be successful and to grow in the export business, conventional methods of secured payment are being phase out while many agriculture-growers now offer open account terms to their new foreign buyers to stay competitive. We are also seeing more growers having to extend their terms of payment in order to attract buyers which adds further pressure on their working capital.

Q: We have been seeing a lot of news on agrifood supply chain disruption due to adverse weather conditions and Omicron infections. What is your take on this?

A: Over the past two years, social distancing and related restrictions have changed our way of living and patterns. For fast-moving and developed cities (e.g. Hong Kong, Singapore and Tokyo), people are switching from dining out to dining in. Online shopping has also become the norm and very much part of our shopping habits. Markets that take a more cautious approach to Covid-19 infections inevitably cast greater impact on the global supply chain, due to the width and span of the agrifood sector. While several markets were still under lockdown until recently, the current conflict between Russia and Ukraine has also put more pressure on the international prices of some key agri-commodities as well as on production costs such as energy and fertilisers. 

Q: What should APAC agrifood exporters be looking out for in 2022-23?

A: The Covid-19 pandemic has had a dual impact on the global food and beverage industry: online food deliveries have been skyrocketing while the sector is grappling with the hardship of out-of-home food services. In addition to key sector risks such as impact of climate change on crop harvests and resumption of trade feuds between Europe, Americas and Asia, the most direct effects of the invasion of Ukraine could be felt in rising grain commodity prices and costs of fertilisers, energy and shipping.

Q: Lastly, what are your tips for businesses to help them reduce risks when trading on open accounts and credit terms?

A: Getting support from experienced credit insurers will be my first suggestion for companies that want to grow their export business safely. As the largest credit insurer in the world, Allianz Trade, we closely track 92% of global GDP which we share our credit intelligence on the markets and customers that you plan to work with. With our extensive global footprint, we are also able to conduct in-depth credit analysis with local credit experts. When you outsource your credit management to us, you can be assured that we will protect your credit risks and allow you to grow your business with confidence.