As the coronavirus outbreak continues to make headlines across the news, global supply chains are experiencing massive shocks and industries are evaluating the impact of the virus on their businesses. According to RaboResearch Dairy Quarterly report titled “The Corona Hangover”, global dairy prices were on an upward trajectory in the fourth quarter of 2019, however stalled in the first quarter of 2020 due to the virus.

Demand in China are starting to recover and RaboResearch anticipates buying pattern to normalise by 2H 2020, following evidence of improvements in some supply chains. However, the risk of a setback or a delayed economic recovery in China presents a major downward price risk to Rabobank’s current forecasts.

“A combination of reduced Chinese imports, significant supply chain disruptions, including extreme competition for shipping containers across the globe, and rising dairy surpluses in export regions will keep downward pressure on global markets through much of 2020,” stated the report.

Despite the situation, milk production from the big seven global regions are increasing and these regions will report year-on-year growth in Q2 2020.

“Nonetheless, the rate of growth in surplus milk will be restrained, and lower commodity prices in the face of weaker economic growth will support buyers in price-sensitive regions that are not dependent on oil revenue. Based on the forecast fundamentals through 2020, this should lead to a down cycle in global dairy markets,” it concluded.

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