News

Coronavirus could impact dairy exports

By Rodney Woods

The outbreak of coronavirus is a significant event for the global dairy market, weighing on sentiment and the 2020 outlook, Rabobank's latest global Dairy Quarterly report said.

The onset of the virus in China — the world’s largest dairy importer — and the spread across the globe has dairy buyers and sellers scrambling to assess the market impact.

“Global dairy commodity prices have already priced-in the uncertainty,” Rabobank senior dairy analyst Michael Harvey said.

“But a less-than-favourable expected finish to New Zealand’s production season is providing some support to global prices.”

The report also revealed that the upward trajectory in global dairy product prices visible late in 2019 had stalled in early 2020.

“Reduced Chinese imports, significant supply chain disruptions and rising dairy surpluses in export regions will drive downward pressure on global markets through much of 2020,” Mr Harvey said.

Rabobank anticipates the buying patterns of Chinese consumers to normalise by the second half of 2020, with evidence of improvement in some supply chains already visible.

“Though the potential of a setback or delay in economic recovery in China presents a major downside price risk,” Mr Harvey said.

In Australia, solid rain events across dairying regions at the start of 2020, combined with strong milk price signals and relief from feed costs, have supported on-farm investments and higher milk flows, according to the report.

Rabobank expects milk production to drop by 4.9 per cent in 2019-20 to 8.4 billion litres and the average milk price to be $6.65/kg of milk solids for the 2019-20 season.