Despite Disease Outbreak, 'People Are Not Going to Stop Eating'
Published: Friday, March 20, 2020
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Week-ly."
On Jan. 30, the World Health Organization declared coronavirus a global health emergency. First identified in Wuhan, Hubei Province, China, the virus now known as COVID-19, was declared a global pandemic by the WHO.
Wall Street saw its worst slide since the Black Monday crash of 1987 on March 12 and you only need to read the headlines to see the many other consequences of this outbreak. The National Basketball Assn. has suspend-ed its season, President Trump addressed the nation and banned travel to and from most of Europe for 30 days, and even the CME announced that it would close its trading floor last Friday.
Dairy prices have come under in-creased pressure as schools close and restaurant traffic lessens. FC Stone dairy broker Dave Kurzawski said in the March 16 Dairy Radio Now broadcast that early estimates of the impact have been scrapped, as the situation is "very fluid and changing hour-to-hour almost, so trying to guess the final result is probably a fool's er-rand." He agreed that the outbreak may be problematic for fluid milk sales and falling restaurant sales will impact butter sales. However, "People are not going to stop eating."
Recent weekly cheese and butter sales are up, he said, and "I know we keep hearing about hand sanitizer and toilet paper, but folks are buying food as well and they're buying dairy products."
Those sales may be being pulled forward and per-haps, two or three weeks from now we will hear demand has slowed, but he added a significant thought. "Ten years ago, if this had happened, anybody sitting at home would have ordered a pizza, and I think we will see a spike in pizza sales, but now you have Grub Hub, Uber Eats, Door Dash, and all these different companies. You can order a steak if you want or you can order a cheeseburger."
He admits that we will lose some sales and prices have already reflected that. Class 3 futures from peak to trough are down about 15 percent, according to Kurzawski, and Class 4 prices are down about 17 percent "and there may be more downside to come, but I don't be-lieve demand is going to curl up and die here."
On a brighter trade note, the March 6 Dairy and Food Market Analyst reported that the U.S. Dairy Export Council announced that China has granted "at least a half-dozen tariff exemptions" for U.S. importers on a range of products, including skim milk powder, whey powder, lactose, whey protein concentrate and cheese.
The DFMA says the concession "comes after China an-nounced last month that it would exempt about 700 products from trade war tariffs. Cheese was not on the previous-ly-announced tariff exemption list, which suggests China may be willing to remove trade war tariffs on all American dairy products and has, in effect, ended the trade war on U.S. dairy," said the DFMA.
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