Dairy exports have been in a constant flux. Even though dairy prices have been somewhat depressed as of late due to China's reduced purchases, the long-term dairy future looks bright for sellers.
"Dairy markets can sustain 2 percent growth in dairy product sales through 2020; most sales will come from emerging markets." To meet growth in international trade, the world will "need another New Zealand or California by 2020," said Rabobank's Tim Hunt.
In the near term, China's pullback on dairy product purchases doesn't appear to be a trend.
"Most estimates indicate that China is buying only half the amount of dairy products as it did in the first half of 2014," said Hunt.
That is the result of a recovery in Chinese milk production from a disease impacted 2013, some slowing of demand and the need to work through excess stock Chinese buyers accumulated through excess purchasing in 2013 and 2014. As China stepped up its purchasing, it drove up prices and pushed other importing countries out of the market. Now as prices have fallen, those buyers have come back into the marketplace.
"Cheaper dairy products will help reinvigorate buyers squeezed out by China in 2013 and 2014," noted Hunt as he spoke to those attending the 12th biannual Western Dairy Management Conference in Reno, Nev.
In a rather short time, China became a major global dairy importer due to rising personal incomes among its citizens, especially for those located on the eastern coast of the world's most populous country.
"In 2007, China imported the equivalent of Indiana's milk production," noted Hunt. Indiana ranks 14th among all states for milk production.
"By the first half of 2014, China's worldwide dairy product imports were on track to consume the milk production from eight U.S. states," said Hunt. In addition to Indiana, those states would have included (rank for milk production): Idaho (ranked 3), Washington (10), Colorado (15), Kansas (16), Oregon (18), Florida (19) and Tennessee (30).
"China has a lot of arable land and water. However, in relation to population, it's unlikely to become self-sufficient in dairy," Hunt went on to explain. "I don't think we will see 30 percent import reliance on dairy in China, but I don't see it slipping to 10 percent either," he concluded.
Hoard's Dairyman Intel 2015
March 16, 2015
