Decline in Chinese Demand Impacts Global Dairy Markets
Irish processors have described the current period as a “seasonally quiet period for dairy markets.” Tirlán chairman John Murphy emphasized that milk supply trends in the coming months will likely be the key driver of market movements in the third and fourth quarters.
Kerry Group noted that while butter prices in Europe remain elevated due to a butterfat supply shortage, the powder market faces challenges due to a lack of whole milk powder demand from China, resulting in increased skim milk powder availability.
The most recent Global Dairy Trade saw a marginal increase of 0.4% after experiencing a 16.9% decline in early July. Unfavorable weather conditions in New Zealand resulted in a 1.1% decrease in production compared to June 2023, while Australian milk production increased by 2.9% over the previous 12 months.
In Europe, Fonterra's figures show that EU milk production increased by 0.1% year-on-year to June, with a 0.7% rise in May compared to May 2023, driven by ongoing growth in France and Poland.
On the export front, New Zealand, the EU, and the US saw monthly export decreases, with New Zealand experiencing a decline of up to 6%. In contrast, Australian exports rose by 5% for the 12 months to May. Fonterra attributes the fall in New Zealand's exports primarily to reduced demand for whole milk powder and fluid milk products in key markets, including China and Algeria. However, demand for skim milk powder (SMP) and cheese increased in key Southeast Asian markets.
In Europe, lower export volumes of whole milk powder, fluid milk products, and cream to key Asian markets led to a 2.3% decline in exports for the 12 months to May, primarily due to reduced trade with China, Algeria, and Japan. This decline was partially offset by higher export volumes of cheese to the US and increased whey exports.
Overall, June saw mixed changes in dairy product wholesale prices. Butter prices rose compared to the previous month, while cheese prices fell. European butter prices reached their highest level since November 2022, at €6,370 per ton, up 6.4% from May prices, according to the UK’s Agriculture and Horticulture Development Board (AHDB).
