PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 18:19 UK, 19th Nov 2013, by Agrimoney.com
'Insatiable' China demand stabilises dairy prices

Dairy prices held up at a benchmark auction as ideas of "insatiable" Chinese demand offset the impact of data showing a jump milk production in New Zealand, the top exporting country.

Prices at the latest GlobalDairyTrade auction pulled out of a losing streak, but only just, edging 0.1% higher.

A 5.4% tumble in prices of rennet casein, and smaller declines in values of anhydrous milk fat and of butter milk powder, was offset by increases in values of, in particular, cheddar cheese.

The performance defied expectations Agrimoney.com tapped into in the run up to the event of some decline in values, given an increased supply of product on offer, with nearly 52,300 tonnes sold, the highest at GlobalDairyTrade in more than two months.

Production record

Furthermore, expectations for dairy supplies further ahead have been boosted by bumper production in New Zealand, where industry data this week showed output of 213.7m kilogrammes of milk solids, in September, a record for the month.

Indeed, it represented a rise of 8.3% year on year, and lifted the year-on-year increase in cumulative New Zealand milk production to 7.2% so far in 2013-14, which began in June.

Data from Auckland-based Fonterra - the world's top dairy exporter, which runs GlobalDairyTrade signal strong production last month too.

The co-operative, at 308m kilogrammes of milk solids, collected 88% of all domestic milk supplies in the first four months of the season.

Extrapolating that record to October implies, from Fonterra's 223m kilogrammes-of-milk-solids figure, national output of more than 250m kilogrammes of milk solids, a record for a month which marks the seasonal peak for New Zealand milk production.

'Insatiable demand'

However, demand has been strong too, particularly from China, whose demand is proving "insatiable" according to National Australia Bank, boosted by disappointing domestic production besides by buoyant consumption.

"Projections by Agrifax suggest that China will need 400,000 tonnes additional whole milk power this calendar year compared to 2012," the bank said.

"The forecast growth of 8% in New Zealand milk production this year will only equate to half of this additional demand even if all of it is diverted to China."

This means that, while world dairy prices remain below April's record high, they remain at "historically elevated levels", and the seasonal rise in Oceania supplies "is only likely to exert very modest downward pressure in the coming months".

Long-term boost

The extent of Chinese demand has been reflected in a decision to import more dairy products from origins other than New Zealand, with purchases from such countries near-tripling year on year in the January-to-September period.

"Some European Union states, including the UK, recently exported whole milk powder to China for the first time in a number of years," the UK's DairyCo bureau said.

And Chinese dairy demand long-term is seen having been given a boost by China's announcement that it is to loosen its one-child policy.

Couples are to be permitted to have two children if either parent is an only child, China's ruling Communist Party said on Friday.

The immediate market impact was to send shares soaring in companies such as China Mengniu Dairy, and China Modern Dairy and Yashili International expected to benefit from increased demand for infant formula.

RELATED ARTICLES
Saputo lifts Warrnambool bid, wins board approval
Genus deepens foothold in huge Indian dairy market
Dairy prices fall, amid relief at rising NZ output
LINKS
Agricultural Commodities
Agricultural Markets
Agricultural Companies
Agricultural Events