Will the coronavirus have a hold on the dairy market?

"For the time being, no major effects have been noticed on the dairy market," says Jan Willem ter Avest, spokesperson for FrieslandCampina. The cooperative dairy group has strong business interests in Asia and also a subsidiary near the Chinese metropolis of Shanghai. "Everything is continuing as normal so far and there are no major effects on the market. However, the situation is being closely monitored and the safety of employees is being taken into account," Ter Avest explains.

Futures market down
Dairy farmers and processors in the American state of Wisconsin are concerned about the uncertainty caused by the coronavirus outbreak, American media report. Last week, the price of the milk contract on the CME futures market fell by several percent, after the consequences of the virus became increasingly clear. 

This dip comes at an unfortunate time for the American dairy industry, says Mark Stephenson, a dairy policy expert at the University of Wisconsin. Dairy prices on the American market were actually recovering after having gone through a deep trough over the past 5 years. Milk prices started to pick up again at the end of last year. "It is a great concern if the world's largest dairy importer (China, ed.) is struggling with such problems as corona."

GDT lower
Developments in China are also being closely monitored in Australia and New Zealand, which traditionally export many dairy products to China. Sofia Omstedt, senior analyst at Dairy Australia, indicates that she is confident that the virus will have an impact on the market. According to her, there is currently too little information available for this. 

She does refer to the quotations at last week's Global Dairy Trade internet auction. The GDT ultimately closed with a loss of 4,7%. She said this could possibly be a result of buyers concerned about the impact of the virus. The effect of the coronavirus on the consumption of dairy products in China will be limited, Omstedt outlines. According to her, the consumption of dairy products is even recommended in China for a better immune system.

Fonterra sharp
New Zealand dairy giant Fonterra has now stated that it is closely monitoring the situation in China. China is a major customer for the dairy group, including milk powder and butter. Just under 28% of all New Zealand exports, of which dairy makes up a significant part, goes to China.

The travel restrictions to China could ultimately affect the dairy market, also because logistics could be hampered. It is not inconceivable that the dairy market could suffer from the outbreak of the virus. A market researcher from Rabobank in Australia compares the situation with the Sars outbreak in 2003. This had a significant impact on the market, although this dip was short-lived. The markets then recovered quickly.