Milk thirst lifts China to top buyer of NZ exports

A clamour for milk has loosened ties between Oceania's two biggest power, promoting China to the top buyer of New Zealand exports, after 24 years when the spot has been held by Australia.

New Zealand's exports to China soared 45% to NZ$9.96bn in 2013, overtaking shipments to Australia, which fell in value by 7.8% to NZ$9.13bn, official data showed.

"China became our top annual export destination in 2013, a spot Australia has held since the year ended September 1989," said Louis Holmes-Oliver, industry and labour statistics manager at Statistics New Zealand.

The boost in trade with China reflects New Zealand's growth to become the world's largest milk exporter, at a time when many emerging countries are struggling to meet demand for dairy products spurred by increasing population and prosperity.

Chinese growth

China's dairy import demand has been especially strong, fuelled also by disappointing growth in domestic output last year, thanks to poor weather in many major producing regions, such as Heilongjiang province.

And it has sought in particular milk powder, on which New Zealand has focused much of its milk processing capacity, with the increasing role of Chinese women in the workplace prompting a spread of bottle-feeding of children, and growth in infant formula.

"Almost half our milk exports went to China," Ms Holmes-Oliver said.

Chinese consumers are also sceptical over the quality of domestic milk, following the melamine tainting scandal, although New Zealand product itself became the subject of a food scare - which turned out to be a false alarm over botulism contamination in milk powder shipments from Auckland-based Fonterra.

Cows replace ewes

New Zealand's overall exports of milk powder soared 27% to NZ$8.7bn last year, with butter and cheese accounting for a further NZ$4.7bn.

That far exceeded shipments of meat, including the lamb for which New Zealand was noted before its farmers began ramping up in dairy in the 1990s.

New Zealand milk production soared from 7.7m tonnes in 1990 to a record 20.6m tonnes in 2012, falling a little last year thanks to drought.

Indeed, by volume the country's whole milk powder exports rose only 2.0% last year, with the stronger growth by value a reflection of the jump in dairy prices fostered by Chinese growth and constrained New Zealand output.

Value vs volume

In Australia, where production too suffered last year, shipments fell 13.9% to 289,601 tonnes in the July-to-November period, the first five months of the 2013-14 marketing year, according to Dairy Australia.

However, by value, exports grew by 11.7% to Aus$1.23bn.

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