Novel coronavirus outbreak appears to hit key NZ export commodity

10:07 am on 5 February 2020

The novel coronavirus outbreak appears to have hit a key export commodity, with prices and sales falling sharply in the global dairy auction overnight.

dairy cows in southland

The average price at the overnight global dairy auction fell 4.7 percent to $US3226 a tonne. Photo: RNZ / Cosmo Kentish-Barnes

The average price at the overnight auction fell 4.7 percent to $US3226 a tonne.

That is the lowest price since last September and follows the 1.7 percent gain in the previous auction a couple of weeks ago.

"Markets have been nervous that coronavirus and the associated practices to prevent spread of the virus will stop China buying," said Amy Castleton, a dairy analyst at the NZX.

"Given China is such a large destination for New Zealand product, this could have a large impact on our economy. However, there does not appear to have been a large drop in Chinese demand at the latest auction."

Prices for products were mixed with falls for most powders but a gain in cheese and butter.

The price of wholemilk powder, which strongly influences the payouts for local farmers, fell 6.2 percent to $US3039 a tonne, a six-month low.

Volumes sold were down 12.5 percent.

Castleton said the futures market had been indicating larger price falls of more than 7 percent, and Chinese buyers had bought more product than this time last year.

However, contract prices for future deliveries were also lower across the board.

Meanwhile, New Zealand Trade and Enterprise is advising New Zealand exporters to China to take steps to protect their businesses, including being paid up front, during the coronavirus outbreak.

It's joined other agencies to post advice and information about impact of the virus on a website.

Among the advice being given is for exporters to stay in close touch with their clients and distributors in China, talk to their banks and insurers about cover.

More information needed

Yesterday, National Party trade spokesperson Todd McClay said he was worried the government is not doing enough to avoid an information vacuum about novel coronavirus' effect on trade and business.

McClay said there was a lot of concern, particularly within the tourism and education sectors.

Given the jobs and reliance on the Chinese market, officials should be doing everything they can to prise information, he said.

"Not all answers will be there, but certainly the government needs to engage more and provide a lot more open information to the export community so they can start to have a bit more certainty and can start planning," he said.

The Minister for Trade, David Parker, said the government had to be transparent in the information it had and to gather it from the industry and pass it on to others.

"There's already a lot of commentary out there that it's going to have an effect on the world economy and ... we're more exposed than some other countries because of China being our largest trading partner although the scale of that is not yet clear."

New Zealand log exporters are bracing themselves for supply chain problems due to the outbreak and tourist operators are experiencing a drop in chinese visitor numbers due to travel restrictions.

The Forest Owners Association said some companies were already reducing their harvesting rate and that would reduce employment.