Dairy prices renewed their decline at GlobalDairyTrade auction,
falling to a 17-month low, amid ideas that, with Chinese buyers relying on
stockpiled product, a revival in values may be some time in coming.
Prices at GlobalDairyTrade, which at the last event rose for the first time in four months, renewed their decline at the first of July's two
auctions, falling 4.9%.
The drop took values to their lowest since February last
year, and extended to 28% the drop in prices so far in 2014.
But it dashed hopes that the rise in values at the June 17
event had set a floor for values, and might lure back buyers which have stayed
on the sidelines while prices have kept dropping.
Indeed, the fresh decline tallied with a caution from
Rabobank last week that producers may have to wait until 2015 for a revival in
prices, with milk output much improved in major exporting nations, but Chinese
buyers have stepped back, after early-year stockpiling.
"China bought more than we anticipated in the first
five months of the year. It now appears they also bought far more than they
needed," the bank said.
In fact, China imports of milk powder, while up year on
year, have been on a declining trend since March.
Imports of skim milk powder in May, at 41.9m pounds, dropped
17% month on month, while those of whole milk powder fell 27%.
"Although data out of China is murky at best, there is a growing
consensus that China stockpiled much of the huge volumes of milk powder it has
imported over the past seven months," the US-based Milk Producers' Council said.
"Some importers are reportedly reselling previously contracted
milk powder shipments to buyers elsewhere rather than allowing them to reach China,
where they are not needed."
Whole milk vs skim
At GlobaDairyTrade, prices of whole milk powder, which
account for the bulk of volumes sold, performed notably poorly in dropping 5.4%,
with particular weakness in values for September-to-November delivery.
The January 2015 contract was only 0.1%, tallying with ideas
that it may take some time for Chinese buyers to work through their stockpiles,
and for less buoyant price expectations to trim milk production growth.
Prices of skim milk powder fell by a modest 0.9%, increasing
above $350 a tonne its premium over whole milk powder – which in containing
extra fat usually is the more expensive product.
However, weakened demand for milk fats was also evident in a
7.4% drop in prices of anhydrous milk fat, now down by more than one-third so
far this year, and a 13.6% fall in butter values.