Dairy producers are confident they can soldier through the coronavirus storm

Dairy companies on the ASX are trying to carry on as usual but these are anything but usual times.

It was already difficult for companies due to changes in the Chinese market and that was before the coronavirus hit. But those in the industry are hanging in there.

This morning Synlait (ASX:SM1) released its half-yearly results and said it was watching the situation daily but had not seen an impact yet.

“While we can confirm there has been no material short-term impact on our financial performance in connection with COVID-19, it represents some downside risk going forward,” the company noted.

Like many other businesses it is encouraging employees to work from home where possible. A spokesperson for the company told Stockhead this had just been set up this week.

She also said as a business-to-business dairy producer it had not seen any panic buying directly.

Meanwhile, Happy Valley Nutrition (ASX:HVM) yesterday announced the purchase of a further 142 hectares of land in New Zealand’s Waikato region.

This is adjacent to land it already owns and where it proposes to build an infant formula plant. The land grab will cost $NZ5.9m ($5.8m) but won’t be settled until June 2021.

Stockhead has contacted the company for comment.

Happy Valley was unchanged this morning, while Synlait fell 3 per cent.

Prices are stalling but production is holding up

Last year, an upward swing in dairy product prices was expected, but Rabobank believes this has stalled in 2020.

“Global dairy commodity prices have already priced-in the uncertainty,” Rabobank senior dairy analyst Michael Harvey says.

“But a less-than-favourable expected finish to New Zealand’s production season is providing some support to global prices.”

Rabobank sees Chinese buying patterns normalising in the second half of 2020.

While the bushfires did impact Australia’s milk production, the high rainfall in February minimised the impact, with production only down 3.7 per cent from the same time last year.