Dairy markets weather COVID-19 storm

Dairy markets stable despite pandemic challenges

Dairy
STRONG DEMAND: The Food and Agricultural Organisation pointed to strong global import demand as underpinning the market.

STRONG DEMAND: The Food and Agricultural Organisation pointed to strong global import demand as underpinning the market.

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Global dairy markets appear to be weathering the COVID-19 storm with prices stable despite pandemic-induced changes in demand in key markets.

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Global dairy markets appear to be weathering the COVID-19 storm with prices stable despite pandemic-induced changes in demand in key markets.

The Australian Milk Value Portal's latest Global Dairy Update says resilience in demand for dairy products is underpinning the market.

International analysts are also pointing to stability - with ANZ in New Zealand last week lifting its forecast farmgate price there by 7.5 per cent while the Food and Agricultural Organisation's dairy price index jumped for the seventh month in a row in December.

The Milk Value Portal's Nanna Moller said the market outlook was mostly bullish, despite differences in global markets, with slowing growth in milk supply in Europe and Oceania and sustained demand for consumer staples.

But she warned demand would be tested in coming months as COVID-19 infections worsen, invoking stricter movement restrictions.

"The uncertainty of extended employment losses and the reduced savings buffer as well as any stimulus measures on dairy consumption means uncertainty for the outlook," she said.

She also pointed to problems in the United States.

"The US remains the weakest market, with strong milk production growth and faltering demand as COVID-19 restrictions keep food service channels in deep distress," she said.

"The new Biden Administration promises to save the day in early 2021, however, and kick the problem further down the road by doling out stimulus payments to households and extending buying and donation programs to soak up the likely growth in milk supply through April.

"Meanwhile it will provide the double-edge of relief ... and pay more subsidies to farmers, keeping them in business and producing more milk."

ANZ was more upbeat in its NZ Forecast Update: Farmgate milk price.

Although it pointed to a lift in milk supply in some of the major dairy-exporting regions of the world, including the United States, European Union, Australia and New Zealand, it said demand was holding up well.

"The additional milk being produced in the United States is currently matched by additional demand created by the government-funded scheme to provide food boxes to those in need," the report said.

"These food boxes must contain drinking milk and other dairy products such as cheeses and yoghurts.

"Funding for this program was recently extended to the end of April.

"The dairy portion of this stimulus programme is expected to absorb 2.5-3 per cent of the total milk being produced in the US when considered on a milk equivalent basis."

It was also less concerned about the impact of further lockdowns - saying demand remained relatively strong through previous lockdowns.

"Demand for dairy products is still growing despite the economic and logistical challenges brought about by COVID-19," the report said.

"Many dairy products can easily be prepared and consumed at home, and the industry has managed to divert goods typically destined for food service into retail channels.

"Processed dairy products also have a relatively long shelf life, which means the product retains its value if supply chain disruptions result in delays getting the product through to end users."

The FAO global dairy price index averaged 108.8 points in December, up 3.4 points (3.2pc) from November.

It pointed to strong global import demand, mostly induced by concerns over the adverse impacts of drier and warmer weather conditions on Oceania's milk production.

High internal demand and lagging production of some milk products in Western Europe also provided support.

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