This year’s threatened closure of the Chinese market to food-grade U.S. dairy exports was a wake-up call not only to the United States but to all global dairy suppliers, according to the latest report from the U.S. Dairy Export Council. Should China, for whatever reason, apply controls to its dairy import regime or should the country’s dairy appetite wane, farmers, processors, traders and all involved in milk production and marketing around the world would feel the effect.
Just how significant is China’s role in world dairy trade?
“In a word, huge,” says Saul Rosenberg, CEO, Gerber California. “It will make or break the market.”
Here’s why: Only about 6-7 percent of world dairy production is traded internationally, making it a relatively thin market. New Zealand (NZ) represents about 40 percent of globally traded dairy products. Three years ago, China purchased inconsequential amounts of NZ milk powder. In the 2009/2010 New Zealand production season, China will purchase about 200,000-250,000 tons of NZ whole milk powder (WMP) and around 60,000 tons of its skim milk powder (SMP). And early results in 2010 suggest large volume buying could continue into 2011.
“If China were not buying from New Zealand as in the 2009 season, there would be some additional 250,000-300,000 tons of milk powder that would need to find another home in the world,” says Rosenberg. “That amount of product, at this time, would overbear the market and apply significant downward price pressure. There isn’t another home for it.”
