US Department of Agriculture sees another 18 tough months ahead for global dairy industry

The US Department of Agriculture has cut its forecast for New Zealand milk output in 2015 — but said the reduction in the world’s No 1 dairy product exporter won’t be enough to revive gobal dairy markets.

It expects NZ farmers, faced with their lowest milk prices in seven years, to produce 2.2% less milk year-on-year, which would their biggest annual milk production decline in 16 years.

But USDA analysts say the Chinese demand which drove prices of some dairy products to record highs in 2013 and 2014, may not recover for several years.

As a result, the tougher operating environment for the global dairy industry may persist for another 18 months.

However, Chinese demand for imported milk formula may buck the trend — now that Chinese authorities have forced 10 Chinese manufacturers to shut their processing lines, and withdraw 48 products from sale, because they exceeded permitted levels of toxins, nitrates and nutrients.

China consumes about $19 billion of baby food annually, making it the single biggest market for such products in the world, and since a 2008 infant formula scandal that hospitalised 50,000 babies, the Chinese have sought out foreign-made brands.