By Stu Davison, NZX dairy insights manager
New Zealand’s dairy exports grew again in September, with the total volume of all dairy products up 32% year on year, though year-to-date exports are still down 6%.
Whole milk powder (WMP) exports lifted 26% year on year. Year-to-date WMP exports remain down 16%. WMP exports to China fell 33% year on year in September, with the lift coming from increased exports to other destinations. New Zealand sent more WMP to Southeast Asia, the Middle East and South America.
Interestingly, Cuba has suddenly shot up in market share, with 5.15% of the total volume of WMP exports sent to Cuba in September. Year to date, NZ’s WMP exports to Cuba have increased by more than 200% to just over 9000t. However this is only about 1% of NZ’s total year-to-date WMP exports, and looking further back it appears more that 2021 was the anomaly, with earlier years having similar volume trends to 2022.
Skim milk powder (SMP) was up just 2% year on year. Year-to-date, SMP exports are up 3.6%. Again, exports to China fell, down 25% year on year. The increase was largely made up by more volume sent to Southeast Asia.
Butter exports lifted 48% year on year. There were increased butter exports to China, up 46%, with increased volume also sent to most of NZ’s other top destinations for butter.
Anhydrous milkfat (AMF) soared 102% year on year, with China again taking increased volume here, up 350% year on year. New Zealand also sent more AMF to Mexico, Southeast Asia, the United States and Australia.
Cheese exports were up 58%, with 79% more sent to China in September and 116% more to Japan.
Australia took less cheese for the fourth consecutive month, down 8.6% year on year.
Whey was one of few categories to see a fall, down 12% year on year. The US is NZ’s main destination for whey, and exports to the US fell 20% year on year. China and Indonesia bought more, up 83% and 115% respectively, but represent much less market share.
Meanwhile, September’s milk production took a knock.
New Zealand milk production fell 3.8% on a milksolids basis in September and was down 3.2% on a tonnage basis. This is the lowest September production since September 2017. This puts season-to-date production at -4% on a milksolids basis and -3.7% on a tonnage basis.
The September result was a little worse than the NZX milk production predictor had calculated at its midpoint, but was within range. We had expected a poor result.
The dairy industry has continued to struggle with issues on-farm. Climatic conditions have caused pastures to struggle. Labour shortages have been limiting, and don’t look set to get any better quickly. Labour remains a key concern for many New Zealand businesses, not just those in dairy. The NZX model currently has October milk production coming in at +0.5% at the midpoint, with a range of -3.9% to +4.9%. It’s likely that production will tend to the lower end of that range – our expectations from reports within the industry are for the -3.9% forecast to be the most likely outcome for October. Our midpoint forecast for the full season currently remains at -1.3%, with some growth forecast between October and February, which now seems unlikely due to pasture conditions over the last fortnight of October, with our low forecast sitting at -6.9% YoY, which is more likely in the face of current spring conditions.
Chinese imports also keep falling.
China’s dairy imports continued down in September, as they have been for much of the year. Overall imports fell 5.5% year on year.
Liquid milk and cream – China’s largest import category by volume – was down 18% year on year in September. China did lift its imports from New Zealand – up 5.3% – but imports from Germany dropped 43%, and those from Australia were down 18%.
WMP imports fell 16%, while SMP imports fell 18%. China imported 2.2% less WMP from New Zealand in September, and also imported less WMP from Uruguay, Australia and the Netherlands.
SMP imports from Australia jumped, up 78%, and imports from New Zealand were up 19%. However, Chinese SMP imports from the US and Europe fell.
Cheese, butter and AMF imports did grow in September, respectively up 6.5%, 47% and 99% year on year. NZ led the way again here, with Chinese cheese imports from NZ up 108%, butter up 58% and AMF up 133%. Whey imports lifted 12% overall, with imports from the US up the most, by 38%.
According to a report earlier in the month from Beijing Orient Agribusiness Consultants (BOABC), the fall in import volumes is due to increasing raw milk production and softened demand. BOABC expects that domestic raw milk production is currently sufficient and exceeds demand. It notes that the import volume of breeding bulls has increased, reflecting higher demand from new farms.
The price of raw milk ticked up slightly in September, up 0.01 yuan/kg. On demand, dairy
consumption closely reflects income levels, and income has been affected by covid measures.
Softer incomes result in softer demand for dairy. Prices for other animal products such as beef, pork and mutton have also fallen.
