Dairy Market Update Q2 2020

Hello to everyone. I hope all are safe and well in these tough times. At times like this everything gets put into perspective and the most important thing is the health of our loved ones and colleagues as we deal with the covid-19 crisis. However, essential business also needs to survive in this difficult environment and this is the time for the food industry to stand strong and keep supply chains in place. These are unprecedented times for everyone and life as we know it won’t be the same for some time.

There are always silver linings to every cloud however and it is vital we all keep a positive frame of mind and stand in solidarity as we are all going through the same experience. The recent signs of community spirit and determination to help the most vulnerable members of our society is inspirational and hopefully this whole experience can bring a previously fractured society closer together.

Retail sales have been extremely strong

The global economy has been rocked with currency and stock markets bearing the brunt but so far the dairy industry has held relatively firm despite the recent lockdown restrictions put in place by governments across the world. Unfortunately foodservice won’t be back for the foreseeable future but retail sales have been extremely strong with consumers flocking in their droves to stockpile on all essential items.

Many long term contracts for foodservice have been postponed for now so that will of course have an impact on the market over the coming weeks even if retail sales stay strong. However again, to put things into perspective, it could be much worse when you look at the impact other sectors of the economy have suffered overnight. Even under lockdown people will still need to eat and dairy products are essential so there will always be a market even if there is some short term pain.

 

While the dairy industry has not seen any dramatic movements just yet, Rabobank expect continued downward pressure on prices throughout 2020. The impact on the global economy will have a ripple effect as Chinese imports are already significantly reduced and the collapse of key global commodity markets and a general global recession will weaken purchasing. The upwards momentum we had seen at the start of the year will be curbed until we see normality again.

Logistics are also proving challenging for global exporters as chilled containers have risen in price in part due to the blockade of Chinese ports. This is a double impact for international co-ops as they will see demand in key export markets in Asia, Europe and North America dramatically reduced and trickier to transport. However these same co-ops will still have considerable milk capacity so their domestic markets may see the benefit with plenty of supply available and cheaper prices available to consumers.

Irish dairy products are high quality and reliable

While there is no doubting the economic impact of covid- 19 it is also important to keep positive and we will now look at some green shoots of encouragement. Ireland is one of the top food producers in the globe per capita with 90% of all production exported across the globe. Supply chains in Ireland are strong and our dairy sector is renowned as a global leader in terms of quality, innovation, sustainability and most importantly in these times reliability.

The quality of Irish dairy products is sustained by a grass fed diet for the herds of dairy cows and every measure will be taken to ensure farmers are protected so production can continue as normal. Other countries are not as fortunate as Ireland as they are reliant on imports and it is also important our food production stays strong so no country is left behind. Ireland’s reputation as the famous green food island is vital at the moment with confidence in other countries capabilities damaged and we have faith Ireland can step in during the world’s hour of need.

We hope all of our customers have not been too severely impacted by the economic shock. We can take solace in the fact that people still need to eat and there will always be an important part of the economy that will need to be sustained by food producers. At Ingredient Solutions we are adapting to changes every day to ensure we keep our families and customer’s safe and supplied. We have built up crucial relationships with our suppliers over the years which is absolutely critical now.

At times like this business needs to show its ability to adapt and we are working tirelessly with our customers to minimise disruption and commercial impact. We are maintaining stock levels to be able to react to needs as they arise. We are also changing internal procedures and processes in line with government guidance and will continue to do so to keep our employees safe.

The dairy sector is very strong and is supported by thousands of farmer suppliers across the continent. The Irish dairy industry is especially robust and all of the co-ops have significant milk pools so we can rely on them to keep our supply chains ticking along. There are enough issues to be worried about in the world at the moment so you can be assured that one less worry you can have is that your supply from Ingredient Solutions will be any way impacted. We wish you and your families stay safe and healthy as that is most important and we can be reassured life will continue.

Yours Sincerely

Ian Galletly

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