China’s demand for dairy whey protein has picked up but the demand outlook for other dairy products looks “questionable”, major New Zealand export competitor the United States says.
In its latest market update, the US
Dairy exporters in the USA gloomy over China demand outlook
The US is the world's third largest dairy exporter; New Zealand is the biggest, earning around $11 billion last year. Photo / File
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“...China’s emphasis on growing domestic production despite sluggish consumer demand, raw milk prices continuing to fall (suggesting an oversaturated market) and profitability struggles on farm are all contributing to the rapid decrease in imports, particularly of milk powders.”
New Zealand’s main dairy exports are milk powders, notably whole milk powder. The industry also exports whey protein.
“While China’s recent announcement of import tariffs against select dairy products from Europe could open opportunities to alternative suppliers, including the US, given demand dynamics in the country and ample local milk supplies, growth in US exports to the country outside the whey complex appear doubtful in the near future,” the export council said.
However across all markets and products, US dairy exports had posted their strongest month of growth in 18 months in July, climbing 9.6% year-on-year in milk solids equivalent.
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“In contrast to prior months, where cheese and high protein whey products were the only products posting significant growth, gains were made across multiple categories in July,” the council said, noting an 11% (7075mt) increase in skim milk powder and non-fat dried milk, a baking ingredient, and a 10% (3516mt) lift in cheese exports.
New Zealand is a major producer of skim milk powder and cheese.
The council said in the first six months of this year, US global dairy shipments to China fell by 9% or 97,817mt, with low-protein whey accounting for a relatively small share of the decline at 4%.
Monthly US low-protein whey exports in the four months to end July had improved 36% or by 4905 mt, but volumes over that span had been roughly similar “with little to indicate there’s been an acceleration in demand even as the port market in China has firmed”.
“Even still, the whey complex in China appears the strongest dairy category in the market,” the update said.
A rise in piglet prices and expansion of investment in pig breeding facilities after an outbreak of swine fever was expected to boost whey demand as China looked to rebuild its pork supply.
“Demand is still relatively soft for pork given the economic dynamics in the country, but with higher prices and tight pork supplies, the incentive to expand pork production and thus whey demand should boost US whey - and therefore dairy - exports to China.
“However, even as whey turns positive, China’s demand outlook for the rest of the dairy portfolio looks questionable.”
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The update said US dairy exports to Southeast Asia, another major New Zealand dairy market, gained 25% or 8631mt in July.
This was the largest single-month gain in more than two years, on the heels of a 14% increase in June.
The US July gains were spread across multiple products, but ingredients led the way, with a 23% (4891mt) lift in skim milk powder and non-fat dried milk to the region. Most of that growth was because of an increase in shipments to the Philippines.
“After three straight years of declining exports, two months of growth do not yet constitute a new trend for US dairy exports to Southeast Asia, especially given limited milk powder production in the United States. However, there are positive factors that are working in the US’ favour and could signal future growth ahead, even if challenges remain over the next several months,” the update said.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the $26 billion dairy industry, agribusiness, exporting and the logistics sector and supply chains.
