The impact of the coronavirus on dairy prices will be modest and short lived and, according to New Zealand bank ASB.
It reports that disruption to dairy markets is most notable in supply chains, with many Chinese factories (that use dairy inputs) closed. However, Chinese buyers remain active, albeit cautious in its Global Dairy Trade auctions and a price impact has been modest to date, it says.
In total over February, whole milk powder prices have fallen 8.6pc in the Global Dairy Trade auctions in New Zealand, which does not make the top 30 of monthly auction falls. Moreover, Chinese buyers remain active, albeit cautious, on the auction platform.
According to ASB’s Nathan Penny, these signs remain consistent with our central view that the coronavirus impact on dairy prices will prove modest and short-lived.
Meanwhile, as key New Zealand dairy regions are very dry, and an official drought has been declared ins some parts, with other regions may not be far away. As a result, ABS has trimmed its 2019/20 production growth forecast to 0.5pc down on 2018/19.
This should, he says, see a lift in dairy prices as soon as next month.
This week, disruptions from coronavirus outbreak drove dairy auction prices lower for the second successive auction overnight. Key whole milk powder (WMP) prices dipped 2.6pc, while overall prices fell 2.9pc.
The WMP price fall was in line with expectations, according to ASB.
The total fall over the month as relatively modest, it says and the monthly fall doesn’t even make it into the top 30 monthly falls in auction history.