China’s phenomenal growth as an importer of dry milk products is expected to continue as imports of whole milk powder (WMP) and skimmed milk powder (SMP) are forecast to grow by 12 percent and 18 percent, respectively in 2013. The increase in imports of SMP has been particularly notable
with imports in 2012 through Octoberreported at 147,000 tons - up nearly 49 percent in comparison to the same period last year. Import growths of other commodities such as dried whey products, cheese, and butterfat have also been scoring impressive gains. While New Zealand has been the
primary beneficiary, the United States has a strong foothold in the SMP, dry whey, and to a lesser extent the cheese import markets. U.S. cheese exports to China in 2012 through October currently total almost 8,000 tons; up 43 percent in comparison to the same time span in 2011.
Summary
This past year has been a rollercoaster ride for dairy markets with international prices starting at relatively high levels, declining in mid-year, and then staging a modest comeback. Initially, the anticipation of a surge in milk production among major exportersfueled by high milk prices caused
dairy product prices to decline sharply. In addition, the health of the global economy added uncertainty particularly as the EU economic crisis lingered as a major unresolved question. The price decline, however, was subsequently arrested as the severity of the developing drought in the
United States became evident and concerns over available exportable supplies caused prices to post a cautious recovery.
Currently, global dairy markets are in a stable phase with prices fluctuating within a narrow range but with no discernible direction as importers and exporters evaluate the future. Milk production in Oceania is expected to increase by 6 percent in 2012 over 2011 due to the combination of unusually
favorable weather and excellent pasture conditions that prevailed during the season. However, for 2013, the forecast pegs milk production to grow by less than 1 percent. In the United States, milk output which is slated to grow by almost 2 percent in 2012, but is expected to remain virtually flat
in 2013 as high feed prices have taken a toll on the financial health of dairy farmers. In the EU, milk production is forecast to grow by less than 1 percent. In sum, it appears that 2012 was an exceptional year but milk output in 2013 will revert back to a more normal pace.
This means that for 2013 the availability of exportable supplies to global markets will likely grow but not by the amounts experienced during the past two years. China will be a key player in determining the health of global dairy markets given its demand for an ever-growing share of dairy supplies. China’s appetite for imported dairy products shows no sign of abating with imports of milk powder products in 2013 set to jump by 14 percent to about 640,000 tons. Further, there are signs that imports of other dairy products such as cheese and butterfat, although currently relatively
minor, are starting to ramp-up.
From an economic perspective the financialsituation in the EU will continue to be seen as a having a major bearing on global situation in 2013. Although the Eurozone is expected to experience a mild recovery in 2013 following a recession in 2012, the fiscal situation remains precarious.
Nevertheless, the global outlook is fairly positive with global GDP expected to post a growth rate of 2.5 percent compared to the 2.2 percent forecast for 2012. In the key Asian markets, the picture is somewhat mixed but China’s GDP is expected to register a growth rate of 8.1 percent – up from the
estimated 7.5 percent in 2012. This suggests that China’s import demand for dairy products will likely continue to strengthen as the middle class expands and concerns about the domestic regulatory system persists. In the America’s, Mexico – a key U.S. dairy market – is forecast to
remain relatively strong which bodes well for sales of U.S. SMP and cheese.
