Dairy markets have started to feel the impact of the coronavirus, with closures in many countries disrupting trade and closing restaurants.
Fresh Agenda director Steve Spencer said the most significant impact is felt in the US and European markets.
Both countries were approaching the peak of milk production.
Production increased 1 to 1.5% year-over-year, but processors had found that a large percentage of their food market – food or beverage – had closed.
“They face the urgent problem of just too much milk for the market over the next few months and drying it quickly to reduce supply and divert it to storable products,” said Spencer.
“The industries are asking government help to buy the surplus products on the market and help meet the need to slow down milk, while compensating farmers for the sudden drop in market size.”
The most significant impact on prices was observed in skimmed milk powder, prices in the EU approaching intervention purchase prices, slightly below 1700 euros / tonne and below 2000 US $ / t in the United States.
Cheese prices also fell sharply, with prices for US cheddar trading at US $ 2,500 / t.
There was a double impact on butter prices, with the closure of retail markets, the sending of additional milk to the dryers and a large part of the fresh cream to the food service.
“The magnitude of this pressure will depend on how quickly the milk supply is slowed and, of course, how long the blockages will last,” said Spencer.
Maxum Foods Dustin Broughton said that uncertainty is increasing.
“The effects of closings to control the spread of disease on employment in major industries will turn into phased and uncoordinated measures to lift restrictions and settle into a deep recession in major economies – the duration of which and depth depend on many factors, “said Dit Broughton.
“These profound changes will have a significant impact on the upstream supply chain, resulting in changes in the product range in response to major changes in product demand – mainly due to lower demand for cheese – for avoid significant production of mozzarella and processed cheese. “
Demand from developing regions remains robust, with in particular a recovery in the activity of Chinese companies and consumers, subject to the control of COVID-19.
While the stock market crash was sudden, milk price signals and supply effects would lag behind.
“Trade and political measures can come in to reduce excess milk – bringing the box down in a scenario where global markets are just moving,” said Broughton.
He said skimmed milk powder prices had dropped, with stocks expected to build quickly, initially due to the slowdown in world trade, due to restrictions on freight and logistics.
“The risk increased with the expected increase in the production of skimmed milk powder and skimmed milk powder (NFDM), the main producers avoiding the production of cheese exposed to the food service markets which were decimated by the COVID-19 closures, “he said.
European spot prices for whole milk increased in March, after falling in February, as world markets continued to be disrupted by the spread of COVID-19.
New Zealand values fell below US $ 3,000 / t in mid-March and continued to slide throughout the month.
The story Overseas dairy processors experiencing pain from coronavirus first appeared on Stock & Land.