China’s demand for dairy drains global supplies

Unprecedented demand from China for milk powder is putting a strain on global supplies and is keeping global prices for milk powder at exceptionally high levels.  China is currently faced with growing demand for dairy products whilst their domestic milk production has actually retracted this year.  As a result the wedge between demand and supply is growing and this is where New Zealand suppliers have traditionally stepped in. In whole milk powder (WMP) terms Agrifax estimates the slow down in Chinese milk production this season would equate to around 300,000 tonnes of WMP.  Add the ever growing demand from Chinese consumers for dairy products and you can easily account for a further 100,000 tonnes equivalent of WMP.  So this year, China may need to buy an extra 400,000 tonnes of WMP (or equivalent), compared to 2012, in order to satisfy their demand for dairy products.   In 2012 New Zealand exported 600,000 tonnes of dairy commodities to China.  This included 423,000 tonnes of WMP, which was 40% of the total amount of WMP that NZ exported that year.   So far this year New Zealand has increased exports of dairy products to China by just 7% or around 25,000 tonnes.  If you consider WMP alone the figures look a little stronger with exports up 14% or 33,000 tonnes during the first eight months of the year.  The drought earlier in the year impacted NZ’s ability to satisfy the growing demand of our largest customer. However, excellent conditions for pasture growth this spring mean the milk is now flowing strongly in NZ and container loads of milk powder are flying out of the dairy factories and onto ships bound for China.   This year to date (Jan – Sept) China has imported more than one million tonnes of dairy products.  This is a 20% increase on the same time the previous year.  About half of this product has been supplied by NZ.  NZ suppliers provide China with virtually all of the WMP