A new report from Rabobank has estimated that total dairy import volume in China will fall by 19% in 2020 due to the onset of coronavirus.
Estimates were released in Rabobank’s latest Global Dairy Quarterly Q1 2020 report, which highlights how the current coronavirus situation across the globe has resulted in buyers and sellers ‘scrambling to assess the market impact’.
The report has based its Chinese estimates on lower demand in retail and foodservice channels and build up in milk powder stocks, on top of larger carryover stocks, as well as further expansion in local milk production through 2020.
In China, dairy demand in liquid milk equivalent (LME) is predicted to fall by 8% in 1H 2020 prior to Rabobank’s previous forecast of a 2.4% increase.
However, the bank anticipates that the forecast reduction will not be as severe as 2014-2015 stocking which resulted in a decline in LME imports of more than 35% over 12 months.
According to Rabobank, China’s consumer buying patterns should normalise by the end of 2H 2020 with evidence of improvements in some supply chains already visible.
The global milk production from the Big 7 global dairy exporters producers (the EU, US, New Zealand, Australia, Brazil, Argentina and Uruguay) meanwhile, is predicted to rise.
For Q4 2019, year-on-year growth of dairy exports was recorded as 0.8%, marking its strongest quarterly gain since Q3 2018. Each region is expected to report a consistent pace in Q2 2020 with a growth rate of 1%.
According to Rabobank, US milk production growth remains range bound although they refer to a ‘slightly gloomier outlook for dairy demand in the coming months’.
In the EU, milk production is reportedly gaining momentum with mild winter conditions laying the foundations for a good spring flush.
December 2019 saw Australia return to growth in the southern export pool, while Rabobank expects milk collections in New Zealand to decline by 1% due poor weather and disrupted trade volumes to China.
The 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.
Due to growing measures taken to limit the spread of coronavirus, Rabobank said there could be a greater-than-expected negative impact on dairy demand and supply chains in the upcoming months due to falling tourist numbers already impacting foodservice sectors in several markets.
Source: foodbev.com