CHINA - According to the recently published Rabobank Quarterly Q2 2014 report, global dairy prices softened throughout the second quarter of the year, a fact attributed to improved milk production in export regions and a combined easing of forward purchasing by China trader’s and buyers.
Alan O’Brien from the Shanghai Office of Bord Bia – Irish Food Board said these factors combined resulted in a 10 per cent to 20 per cent drop in international dairy commodity prices for the three months leading up to mid-June.
China’s Buyers & Traders Work through Inventory Accumulation
In the first four months of 2014, the milk production in the Big 7 exporting regions (EU, US, New Zealand, Australia, Brazil, Argentina & Uruguay) recorded unprecedented growth of 5.5 per cent (additional 5.4bn litres), half of which coming from the EU; the result of good weather and farm-level investment in the run up to quota removal in 2015.
Within these key exporting areas (EU, New Zealand and Brazil), domestic consumption also remained modest, which resulted in a surge in exports to world markets, initially absorbed by Chinese buyers.
According to Rabobank, the first five months of 2014 witnessed significant Chinese import growth (60 per cent of the same period in 2013).
However, as highlighted by the report, the past five months have seen a slowing of local demand in China as well as an increase in domestic production, the result of favourable weather and growing economies of scale (see farm-level restructuring).
This improvement in domestic production will leave Chinese traders and buyers with increased stock levels.
This will impact on import demand as the year progresses.
TheMeatSite News Desk