USDA says Chinese dairy imports to remain sluggish

China’s imports of milk and dairy powders may stay restrained for longer than expected, according to the United States Department of Agriculture’s (USDA) Beijing bureau.

The latest indicators point to China having 300,000t in carry-over dairy stocks, almost twice as much as previously estimated. The adjustment comes from higher than expected domestic production combined with a small drop in dairy consumption.

The increase in powder production has been attributed to a Chinese government requirement that processors honour prior contracts to purchase milk from farmers, which was subsequently turned into powders.

As a result, forecasted imports for 2015 have been revised downwards by 33% to 400,000t. With the Chinese buying around one third of the total whole milk powder traded globally, DairyCo analysts believe any slowdown in their purchasing will keep global prices under pressure.

Meanwhile, DairyCo is also reporting that international milk markets largely remained under pressure in May as global supply continued to be strong. The only product bucking this trend was butter with US prices increasing by 7.9% over the month to reach $4,128/t.

Skimmed milk powder (SMP) prices in the States fell 2.3% to $2,087/t due to a reduction in demand at a time when supply is plentiful. EU prices also fell, on average, to $2,025/t, down 4.7% on the back of a quiet market.

Whole milk powder (WMP) prices picked up somewhat in the US during May, up $59 to $2,899/t. Demand picked up in the middle of the month but fell away towards the end. Prices for EU product fell 2.0% to $2,756/t with manufacturers primarily fulfilling existing contracts rather than agreeing new deals.

US cheddar prices increased 2.7% in May, up to $3,650/t, largely due to good domestic sales.