China buying more is only dairy good news

January milk prices held unchanged at Glanbia and at Dairygold Co-op, but a third big buyer, Lakeland Dairies cut its price by 0.5c/litre.

A tenth consecutive fall has taken Ornua’s monthly purchase price index to 85.7, compared to 135.1 in February 2014 — a fall of more than one third in the indicator of market returns for dairy produce.

Market sentiment suffered further on Tuesday when the GlobalDairyTrade auction price fell a further 2.8% — although some observers were relieved that a 5-10% fall indicated by futures markets didn’t materialise.

The Bank of New Zealand joined voices from down under blaming strong European milk production for weak prices.

“Much more milk out of the EU, in particular, along with the Russian trade ban on EU dairy products and a generally weak euro making that product competitive on international markets have all played a part in the ongoing weaknes,” said a spokesperson.

Meanwhile, New Zealand production is not falling as fast as thought, as rain boosts pastures down under.

Milk production is likely to fall only 3-4% this season, rather than the 6% looking likely in December.

In contrast, EU milk output is rising at 5% per year.

On the demand side, exporters in New Zealand say Chinese imports jumped 46% in December year-on-year, including a doubling in volumes of fresh dairy and infant formula products.