Coronavirus is forcing China, Australia’s largest dairy customer, to batten down the hatches but Freshagenda analyst Steve Spencer thinks there’s little likelihood farmgate milk prices will suffer.
While Mr Spencer noted the most recent NZ futures result saw whole milk powder fall by $400 a tonne, he was confident there would be little impact on Australia.
“In the immediate time frame, it’s fear that’s changed short term commodity price and futures markets and some of them have reacted quite significantly,” he said.
“Whole milk powder doesn’t really impact Australia, butter prices haven’t moved a lot but there’s not a lot of trade in those futures contracts.
“It’s a short-term effect, so if there’s some slowing or displacement of trade, it will pick up once this is under control or quelled.
“So it might be an impact for a quarter of a year and then a rebound.
“If that causes Australian companies to adjust farmgate prices, I’d be highly surprised.
“There wouldn’t be any correction, I’d imagine, since most things are locked in and we’re in the lower part of the season.”
Nor did he think the impact on the Chinese economy would affect Australian farmgate milk prices.
“Fear grips markets, things trade down and there’s a realisation that things have calmed and it returns to normal after about a quarter,” he said.
Otherwise, he said, demand remained firm, and although US and European milk pools were growing a little, it was “nothing spectacular” and the outlook was still “fairly positive”.
This article was originally sourced from https://www.farmonline.com.au/