Nerves are growing in global dairy markets about the potential impact coronavirus could have on trade patterns.

China is the world’s largest importer of dairy, but restrictions on movement of people and goods implemented by the Chinese government have raised doubts about how dairy product will actually get into China over the coming months.

After an extended Chinese new year holiday, people are trying to get back to work in China. However, most factories in the country, including in the food industry, are operating at below 30% production capacity, with many employees still restricted from returning to work.

Literally thousands of ships are sitting in Chinese waters waiting to dock

This week, Kerry Group boss Edmond Scanlon said the five factories it operates in China are only at 30% capacity.

The restrictions introduced in a bid to contain the virus have also resulted in huge congestion at Chinese ports. Literally thousands of ships are sitting in Chinese waters waiting to dock, which is building into a major backlog for normal trade flows.

GDT auction

Dairy prices fell this week in reaction to the uncertainty. At the latest GDT auction in New Zealand, average dairy prices fell by 3% with less than 30,000t of product sold.

The price of whole milk powder (WMP) slumped 3% below $3,000/t (€2,750/t), while skimmed milk powder (SMP) prices were also down 3% to $2,540/t (€2,350/t).

Closer to home, European butter prices eased slightly to €3,520/t, while SMP prices dropped to €2,560/t.

Cheese markets are holding firm due to strong demand with cheddar prices steady at €3,200/t.