• ZISK

Dairy Markets Tank on Covid-19 Concerns

March 18, 2020

As each day passes, additional Covid-19 restrictions exert a growing influence on the daily lives of consumers, dairy producers, and processors. Travel bans to China were followed by a near standstill of domestic travel both here and in Europe. Conferences and meetings—some well into summer— have been cancelled. Many people have been asked—some ordered—to work from home, schools have been let out, and restaurants, bars, and other gathering spots in many states have closed to reduce the spread of Covid-19. The non-essential movement of people and certain goods will likely be next.


Today, President Donald Trump announced the United States will be closing the U.S-Canadian border to non-essential travel. Despite assurances from Trump and Canadian Prime Minister Justin Trudeau that food, fuel, and medicines would not be affected, some disruptions could occur. Earlier this week, CME nonfat dry milk (NDM) spot and futures markets tumbled on rumors of border closings. In today’s spot trade, NDM fell below $1/lb. and confirmation of border closings here and around the world sent NDM futures deep into expanded trading limits. April to September 2020 contracts fell between 4¢ and 6¢. U.S. exporters typically send well over half of the country’s annual production to foreign partners. Border closings have become another risk to dairy, and demand and export opportunities have weakened since the beginning of the Covid-19 pandemic. While NDM trading was bleak today, butter was worse. Trading was halted in several 2020 months as prices hit the expanded 10¢ limit lower. For the first time since February 2015, CME spot butter markets closed at $1.67/lb.—a level that just a few weeks ago was unthinkable. Plunging butter and powder prices also drove several Class IV contracts limit down, a drop of 75¢. According to various ag reports, dairy prices could retreat 20%, sending prices back toward 2008 lows. Until the continuous rollout of bad news slows, volatility will continue as buyers and sellers price in the worst expected outcome.


DailyDairy Vol. 8, No. 243