New Zealand dairy co-op Fonterra says its consumer exports to China increased by 14% in February, with industry analysts predicting the trend will continue.
Chinese imports for the 12 months to February rose 6%, versus a 1% gain in the year to January. Low Chinese imports and the Russian import ban are among the principal factors cited by many dairy co-ops for the ongoing sector price deflation.
“Our feeling is the extreme excess we saw a year or so ago in stockpiles in China has been coming out. If that is true you’d expect import demand would start matching domestic demand again,” Bank of New Zealand economist Doug Steel told Reuters.
Higher prices in New Zealand’s fortnightly global dairy price auction suggest “some more buying as well”, he added.
The pick-up in Chinese imports is being driven by a drawdown in local stockpiles. Around 85% of the farmers in China are currently operating at a loss, with prices down more than half since early 2014 amid a global surplus.