Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Dairy prices hit 21-month low as China buying ebbs

Twitter Linkedin

Dairy prices at GlobalDairyTrade tumbled to their lowest in 21 months, led by a plunge in whole milk powder prices, amid ideas that Chinese demand may have retreated even further than previously thought.

Prices at the twice-monthly auction dropped by 8.9%, as measured by the GlobalDairyTrade index, matching the fastest rate of decline in four years.

The drop took the index to its weakest since October 2012, and took to 39% its retreat from a high in April last year.

And it was led by whole milk powder, for which prices tumbled by 10.9% to an average of $3,088 a tonne.

'Big hit'

The decline was attributed to soft demand by China, the top dairy importer, which has stepped back from purchases after a stockpiling drive early in the year, co-inciding with a period of tariff concessions on imports from New Zealand, the biggest milk exporting country.

Rabobank, earlier this week restated a caution over the extent of Chinese inventories, saying they "remain high, which is keeping some large importers out of the market temporarily to work through accumulated stocks".

The drop in whole milk powder prices - which took their, unusual, discount to skim milk powder to a three-year high of $427 a tonne – also tallied with ideas of soft Chinese demand.

"The whole milk powder side especially depends on Chinese buying," John Lancaster, senior dairy analyst at INTL FCStone's Dublin office, told, terming as "surprise" the "big hit" to prices.

"This shows what happen you have one main buyer, and demand from that buyer dries up."

Whole milk powder prices, down 38% in five months, are now below long-term average levels, he said.

Production rises

The difficulty of obtaining accurate information on China's dairy sector makes it difficult to foresee how the market will pan out, Mr Lancaster added.

Chinese demand is being undermined by improved production, although estimates vary on how significantly output has improved from last year, when the dent to volumes from an exit by small farmers from the sector was compounded by disease and poor weather.

However, milk output in major producing countries has been on a winning streak, boosted by the incentive to farmers from the elevated prices, until late.

New Zealand output ended the 2013-14 year, which ended in May, up 10.5%, while Australian volumes were up 8.2% in May, and European Union production up 7.3% in April, the latest month available.

US stands apart

US production has remained relatively weak, in part thanks to poor pasture condition in many major producing states, such as California, until late, and was up only 1.4% in May.

US dairy prices have proven strong, compared with those at GlobalDairyTrade, helped by idiosyncratic factors, including the lower production growth.

US sales of non-fat dairy milk rose 8% year on year in May to a record 60,358 tonnes, driven by sales to Mexico.


Twitter Linkedin
Related Stories

Can cotton prices extend their rally?

History suggests futures will not stay long in the 70s cents a pound. So which way will they trend?

Morning markets: Hard wheat regains premium over soft, amid US dryness worries

Kansas City wheat outperforms, as Plains precipitation worries extend to a dearth of snow cover. But Kuala Lumpur palm oil hits a 16-month low

Evening markets: Ags gain, as funds begin to get that year-end festive mood

Ag prices recover, helped by the likes of more positive comment on US export competitiveness, and some more negative talk on Argentine rains

Morning markets: Grains stage a recovery. Will it last?

Corn, soybean and wheat futures start Wednesday making headway which has been difficult to come by of late. Cotton gains too
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069