News Coronavirus
Rabobank: Coronavirus affects dairy exports
The Coronavirus has been causing a stir for weeks and the dairy market cannot escape it either. It is difficult to estimate what the ultimate impact will be. To provide some guidance, Rabobank has carried out an analysis. And that predicts a significant drop in imports.
Last week it became clear that the corona virus is slowly infecting the dairy market. This is how the DCA quotes influenced by uncertainties and various dairy farmers are also affected by it. Rabobank therefore believes that the potential effects of the virus outbreak on the global dairy market should not be ignored.
Stocks too much
In December 2019 and January 2020, China imported a large amount of dairy. Due to the virus outbreak, there has been considerably less demand for these stocks than previously expected. This is mainly because shops keep their doors closed and there is significantly less foot traffic through the streets. It is therefore expected that China will have little appetite for more dairy products in the coming period.
Rabobank has carried out an analysis to see what impact the virus could have. This shows that a decrease in demand of 1,1% over the whole of 2020 would lead to an import decrease of 11% compared to the import volume of 2019. If the demand decreases by 5%, this even leads to an import decrease of 25% compared to 2019. the import volume of XNUMX. The shift would therefore have a significant impact on the food sector.
Chinese import expectations
In 2019, China imported almost 670.000 tons of whole milk powder, which is an increase of 30% compared to the previous year. The import of skimmed milk powder increased by 23% to a record amount of 340.000 tons. Rabobank previously expressed the expectation that imports would fall by 3% in the first half of the year and that imports would increase by 1%. Now that the corona virus has emerged, there is a good chance that the situation will deviate from expectations. This also has major consequences for the export of milk products from countries that supply China.
In a 30-day impact estimate, Rabobank indicates that the consumption of liquid milk can decrease by 2% to 4% per calendar year. This is due to the loss of sales at retailers as fewer people go to the store. It is assumed that this is partly offset by online purchases. Cheese imports are expected to fall by at least 5%, which amounts to approximately 6.000 tons (estimated based on nearly 115.000 tons of imports in 2019). Less mobility in particular has a major impact on the entire sector.
Chinese dairy farmers in trouble
Not only countries that export to China are affected by the virus outbreak, their own dairy farmers are also having a hard time. Especially the small and medium-sized companies. This is largely due to the aforementioned mobility. The transport of milk is in serious trouble due to increasingly strict traffic controls.
As a result, some small and medium-sized companies are forced to wash away milk. In addition, they often do not have watertight milk supply contracts with the processors, which means that they deliver at (sometimes much) lower milk prices. In general, large companies have arranged this better with the processors, according to Rabobank.
Jorine Cosse
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