International demand for dairy products has bottomed out and there are already signs that markets are starting to improve slightly, according to Arla Vice President Frede Juulsen.
He said that markets are currently well below what would be regarded as normal prices.
“China will remain a key player in determining the strength, or otherwise, of international milk prices. Stock piling took place at a rapid rate during the end of the 2013/14 year. However, since then we have seen no growth in Chinese demand for dairy products. And this has led to the recent slump in international consumption levels.”
Juulsen believes strongly that the future performance of the Chinese economy as a whole must be factored in as a key determinant in shaping future market trends within the international dairy sector.
With China’s top dairy farmers currently receiving between 50c/L and 55c/L for their milk, roughly twice the current farmgate European average, he said this scale of differential, the tide should soon start to swing back in terms of Chinese buyers sourcing imported dairy products.
“The future impact of volatility is the other big issue that must be factored in to the equation.
“In the short term, there is every prospect that milk markets will start to strengthen again within the next four to six months. And the long term rends for the dairy farming industry remain positive. Yes the world’s population is set to increase significantly over the coming decades.
“But actual day-to-day consumption levels of dairy products in countries like China will be totally dependent on personal income levels in these countries.
“Chinese consumers recognise the value of dairy protein in their diets and those of their children. But they will only consume what they can afford to purchase. And this is why the tenor of world dairy markets is so linked to the general economic performance of countries like China.”