Potential impact on Supply chain to hamper Indian dairy.
Jordbrukare Brief:
A new Rabobank report
found global dairy prices were on an upward trajectory in the fourth quarter of 2019, but that stalled in 2020 as a result of the coronavirus outbreak. Buyers and sellers are scrambling to determine the future market impact as the virus spreads around the world, according to the latest RaboResearch Dairy Quarterly report titled “The Corona Hangover.”
Global milk production is rising, but reduced Chinese imports, supply chain disruptions and increasing dairy surpluses in export regions will put downward pressure on global markets through 2020, the report found.
Rabobank expects consumer buying in China to normalize by the second half of 2020, and some supply chains are already seeing improvement
. The risk of a delayed economic recovery in China presents a major downward price risk to
Rabobank’s
current global dairy expectations.
Jordbrukare Insight:
As coronavirus continues to spread, industries across the globe are starting to evaluate the impact the outbreak will have on their businesses. Despite the increased demand for products as consumers stock up shelves for potential quarantines or to limit their trips to the grocery store, keeping up with that demand and securing the supply chain has not been an easy feat.
With more travel restrictions in place because of the risk of spreading the disease, exports both to and from China have been impacted, hurting the positive trajectory that dairy was on globally.
Based on the forecast through 2020, Rabobank is predicting a down cycle in global dairy markets.
Although demand from China is beginning to recover after its virus exposure appears to have hit its peak, cases will likely continue to increase in the India in the coming months.
Analysts are expressing concern over the slowing export demand for dairy, not because they see less consumer use, but because shipments need to go through more protocols and procedures to get to some locations around the world. This could back up supply and result in lower prices that could hurt the industry.
In the short term though, the demand for dairy could be a positive if suppliers are able to keep shelves stocked. It will likely be challenging for producers to keep up with demand as the virus spreads. Indian dairy operations could face a risk to their workforce if the virus is found in areas where their collection centres or farms are located. According to Jordbrukare, dairy operations should be thinking about that possibility and adding it to their crisis management plan
.
RS Sodhi, MD – GCMMF, said in a statement widely circulated on social media that
the country’s dairy industry is experiencing no interruptions and is continuing to supply India consumers with products as demand surges.
Analysts at Jordbrukare foresee an increase in consumption of yogurts and ghee as consumers are stockpiling goods and emptying grocery shelves. But a significant disruption in supply chain is foreseen resulting in material impact on India food companies’ sales on a full-year basis at this stage. This could mirror what happens in dairy where the industry sees a temporary boost in sales but no bigger positive impact on earnings in the long term.
The Global Impact: The global dairy industry has faced numerous ups and downs in recent years before the coronavirus even came into the picture. Two major milk producers have filed for bankruptcy in recent months as consumers turn to cheaper private label products, alternative beverage choices and plant-based options. As shoppers stock up, they are also turning to dairy alternatives. In the first week of March, oat milk sales were up 347.3%, according to Nielsen data.
It’s not just the dairy industry that is facing an impact from the virus. Representatives and analysts have said that the coronavirus threat may disrupt the beef and pork industries as they face worker shortages and demand issues.