Chinese child drinking milk.
September 27, 2018

China is Biggest ‘Wild Card’ in Global Dairy Markets

 |  By: Jim Dickrell

“China’s import appetite is the biggest variable in where the [global dairy] markets go from here,” say Alan Levitt and Marc Beck, both with the U.S. Dairy Export Council (USDEC).


In an analysis of world dairy markets released today, they say that China will determine which way prices will go the rest of this fall and into next year. Levitt is USDEC’s Vice President of Communications and Market Analysis; Beck is USDEC’s Executive Vice President and Business Unit Director, Middle East/ North Africa.


“Without a pick-up in volume from the world’s single biggest buyer, it’ll be difficult to see much tightening of the market balance,” they say.


One of the biggest concerns is the U.S.-China trade war that seems to be escalating week after week. Chinese tariffs on U.S. dairy products took effect in July. Chinese imports of dairy actually increased 8% that month, but the United States lost business to primarily the European Union (EU), but also to New Zealand and Argentina.


“Among the top five suppliers [to China], the U.S. share of basic commodity imports fell from 24% in the first half of the year to 12% in July,” says Levitt and Beck. “U.S. volumes of milk powder plunged, and U.S. share of cheese imports dropped from 17% in the first half to 4% in July.


“More significantly, U.S. share of whey and whey protein concentrate declined from 54% in the first half to 41% in July,” they say. Whey product volume dropped 5,000 tons in July, and EU whey sales increased by an almost identical volume.


Levitt and Beck also note that the weakening value of the yuan, China’s currency, isn’t helping matters. “China’s currency is down 8% versus the U.S. dollar since mid-April, undercutting Chinese purchasing power,” they say.


The U.S.-China trade dispute notwithstanding, there is still some hope for better prices next year. Levitt and Beck note that cow culling is up in Europe, the United States and New Zealand. “By the first quarter of 2019, for the first time in years, we could see little or no milk supply growth from all five major exporters at the same time,” they say. “That could make for improved market balance in 2019.”



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