US officials countered talk of tumbling Chinese dairy import
demand as it hiked by more than 50% its forecast for the country's purchases of
whole milk powder, citing a disappointing rise in the country's own production.
The US Department of Agriculture acknowledged "speculation
that China's volume of dairy imports were set to decline in 2014", and "much
uncertainty" over future prospects for trade.
However, "the evidence to date suggests that import demand
for a broad range of dairy products shows no sign of flagging," it said.
"The pace of imports of milk powder during the early months
of 2014 continues at a breath-taking pace."
'Surge of additional
The comments contrast with market talk that weaker demand by
China, the world's top dairy importer, is behind a collapse in dairy values,
which at GlobalDairyTrade auction this week hit a 21-month low.
The USDA highlighted the rise in production as being behind
the collapse, as it raised by 3.2m tonnes to 482.1m tonnes its forecast for
world cow's milk output this year, led by upgrades to European Union and New
"Following the high international prices for dairy products
in the second half of 2013 and early 2014, milk production in a number of
countries has sharply rebounded as farmers responded to the strong margins.
"This trend has been further accelerated by favourable
weather, particularly in New Zealand and the European Union.
"The surge of additional product on the markets has put
downward pressure on prices, particularly for whole milk powder," which has
dropped nearly 30% from early-year highs.
For China, the USDA lowered its forecast for milk production
by 1.0m tonnes to 36.0m tonnes, albeit still representing a 5.0% rise year on
year, "as stricter health requirements for milk are expected to lead to reduced
supplies from small-scale dairy farmers".
There were other reasons to expect buoyant demand too, with
the history of tainting scares in China's dairy sector still prompting "concern"
among consumers over the quality of domestic supplies.
"Consumers appear motivated to pay premium prices for
imported products such as milk powder and fluid milk."
Indeed, for the USDA hiked its forecasts for China's whole
milk powder imports by 350,000 tonnes to 1.0m tonnes – more than triple those
three years ago.
The department cited "limited domestic supplies, stricter regulations,
and growing consumer demand".