By Alexandria Winning-Browne, NZX dairy analyst
Beijing Orient Agricultural Business Consultants (BOABC) have released their latest dairy monthly report, highlighting a slight decrease in production of dairy products in September, while the raw milk price has stopped declining.
September’s Chinese dairy processing totalled 2.758 million megatonnes (MT), up 5.8% year on year (YoY). This brings year to date figures up to 23.10m MT, an increase of 2.6% YoY. BOABC attributes the recovery of milk production over recent months to control of the covid-19 pandemic across the country. BOABC also highlights that while dairy consumption has remained low over recent months, that it is expected consumption to return to normal as the pandemic spread continues to be further contained.
Furthermore, BOABC states the shift towards healthier products, with a pull away from the consumption of pork and a push towards the consumption of milk, beef, lamb and seafood; although lamb prices in China are falling dramatically currently. Chinese consumers dealing with lockdowns and associated concerns are also shopping closer to home, with hyper and supermarket sales figures easing, while sales via convenience stores have lifted significantly. E-commerce in China continues to grow, with this avenue of dairy consumption quickly becoming a key avenue to market. Consumer research shows that these e-commerce avenues of consumption allows Chinese consumers to understand their purchases better, providing insights into key information around each product – from environmental claims, health claims and provenance claims, all which rate highly in Chinese consumers requirements for purchases.
In conjunction with milk production increases, the Chinese raw milk price has also stopped declining, with the price sitting stagnant at 4.14 yuan/kg MS from the end of September through October. Retail prices of liquid milk and yoghurt have also eased slightly in October, retail prices continue to be variable, as seen over the 10 months of this year. Imports of liquid milk decreased 18.2% YoY in September. The price of imported liquid milk did increase 19.3% YoY, however. Imports of NZ liquid milk and cream made up 33% of September’s total imports, up 6.2% YoY, while the price for these exports was 12.4% higher YoY.
Chinese soy meal prices have also continued to jump, up another 12.3% from September’s figure, 33.5% higher YoY. Corn prices also continue to increase, up 0.9% from September, a 5.4% increase YoY. This continues the trajectory of cost increases over recent months, with forage, labour, and transportation costs pushing upwards because of covid-19 lockdown impacts.
Butter imports continue relatively steadily, with year to date imports only 1.1% behind the same period last year, but with large gains over the three months to September. September’s butter imports were 60.9% higher YoY.
Imports of both skim milk powder (SMP) and whole milk powder (WMP) continue to lag, with SMP imports down 24.3% YoY, while WMP imports are down 16.2% YoY with the same deficit for September’s WMP imports.
China’s total imports of dairy are 20.3% lower at the end of September, compared to the same period the year prior; however the value of year-to-date imports are only 2.4% lower. Expectations are that full year Chinese imports will finish the year around this 20% lower point, with some expecting that Chinese imports will continue to lag during the first half of 2023.
Meanwhile, the USDA has announced that it would invest nearly US$1billion to “purchase food for emergency food providers like food banks.” The announcement looks likely to focus on “protein items” to support activities for children and families. The volume of this investment that will flow to Dairy is uncertain at this point in time, but most expect Cheese and Liquid milk to be included.
The last time the US government announced large food purchase programs, such as the “farmers for families” food box programs in the early stages of the covid-19 pandemic, the US market saw massive price swings for Cheese, with prices swinging between highs and lows in the space of days.
These programs will surely upset the US Cheese market, potentially helping the global cheese market, as this program artificially pulls cheese out of the US market.
