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Insights April 2020

6 April 2020 |Dairy
Dairy cow image

Insights April 2020

6 April 2020 |Dairy
The Coronavirus pandemic (COVID-19) is profoundly changing the domestic and international landscape. This edition of the Rural Bank Insights Update aims to provide a summary of Coronavirus’ impact on Australian agriculture as it stands today.

The report specifically addresses your questions around input supplies, underlying demand for food and fibre, and the impact on the supply chain across the commodity segments.

Overview

  • The lack of international flights has led to an increase in the cost of airfreight making it difficult to transport fresh dairy products to Asian markets. The recent announcement by the Australian government to provide more cargo flights to get fresh produce to market will provide some benefits to fresh perishable dairy products, however most
    dairy exports will still move via ships.
  • Shipping routes to China are back running at close to full capacity as back logs have been cleared, making containers available for exports such as milk powder and cheese.
  • Demand from the food service industry both domestically and internationally has declined as shutdowns impact
    local eateries and international restaurants. This has been partially offset by increased purchasing of dairy products
    domestically as consumers get prepared for an extended period of lockdown.
  • Discretionary spending is expected to be tight in the wake of the coronavirus driven economic downturn. This will
    impact demand for dairy products particularly cheese in both Japan and China.

Key Markets

China

  • In 2019 China accounted for 25 per cent of dairy exports by value.
  • Milk powder was the main product accounting for over 75 per cent of the dairy products exported. Demand for milk powder from China is expected to ease as purchasing power declines in response to the economic
    slowdown and a focus on working through stockpiled milk powder instead of purchasing additional products.
  • North Asia has increased the quantity of dairy products purchased via global dairy trade after significantly reducing purchasing activity in February. However, South East Asian countries are now feeling the pinch of coronavirus shutdowns as they begin to decrease purchasing activity.

Japan

  • In 2019 Japan accounted for 19.7 per cent of dairy exports by value.
  • Cheese is the major dairy product exported to Japan. In addition to supply chain disruptions driven by
    coronavirus, cheese exports could face a decrease in demand due to a tightening of discretionary spending
    amongst Japanese consumers.

Source: Global Dairy Trade

 

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