In New Zealand, they look at China with great concern as the demand for whole milk powder is not emerging while Asians increase their own production and their economy does not recover.
In China, milk production has been increasing more than expected, leading to a 30% decrease in whole milk powder imports compared to the previous year during the first six months of the year.
Whole milk powder prices on the Global Dairy Trade (GDT) auction platform have fallen by 11% this year and are 21% lower than the same period last year.
These prices have led Fonterra to lower its primary production price forecasts, and everyone is betting that they will decrease further in the coming weeks.
Yesterday’s auction prospects indicated a 3% fall for WMP, but the price ultimately dropped by 8% and is approaching the threshold of 2,800 dollars per tonne earlier than anticipated.
The southern hemisphere is heading towards an increase in seasonal production, posing a significant problem for Oceania in general, but particularly for Fonterra, which supplies between 85% and 95% of China’s whole milk powder imports.
New Zealand experts estimate that due to the high stocks currently held by China, international milk prices will only stop falling by the end of the first quarter of next year.
In addition to this reality, various warning signs indicate that the Chinese economy is not in good health, and any recovery will take longer than expected.
The economy of the Asian giant is not immune to what happens in the rest of the world. The world’s major central banks are making great efforts to counteract the inflationary measures that took place during the pandemic, even before, with monetary printing above historical averages.
Today, those managing the global economy are seeking to cool it down, which is causing changes in household consumption. The retail markets in major countries see that dairy consumption is not at previous years’ levels, while the world is producing more than demanded.
Meanwhile, what happens in Oceania can have repercussions in South America. Due to the lack of market in Asia, exporters are now looking closely at Algeria. This could greatly complicate matters for Argentina and Uruguay.
