Prices ease at NZ auction, but China demand will rise

Global dairy commodity prices eased by almost 2% at Fonterra’s latest auction, to a weighted average of $4,888/t (£3,055/t). It was the sixth consecutive sale where values had remained in a narrow range, leaving prices 1.2% higher than they were in mid-July, despite a 5,313t increase in traded tonnage, to 43,261t.

Butter led the market fall, losing 3.5% on the previous fortnight’s auction, with whole milk powder dropping by 2.9% and skimmed milk powder rising by 0.7%.

Meanwhile, Chinese demand for dairy imports was set to grow for at least the next two years, according to a report by Rabobank analysts. “Despite the fast pace of development in China’s own dairy farm system, local production has stalled,” it said. China’s reliance on dairy imports had soared by 20-30% a year over the past two years, and that would continue until the growth of large-scale dairies outweighed declining “backyard” production.

“Demand growth is expected to prompt Chinese buyers to seek out more diverse import options, instead of continuing to rely on one or two key product origins such as New Zealand,” it added.

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