Archive: Growth in Chinese import demand to continue?

Published 22 July 14

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Uncertainty regarding China’s current level of import demand is providing some varied forecasts for price developments on global dairy markets for the coming months. In its latest Dairy World Markets and Trade report, the USDA predicts that the pace of China’s dairy imports seen in the first five months of the year is likely to continue throughout 2014. This is based on the assumption that domestic milk output will grow at a slower pace than the previous USDA forecast from December.

However, it is not clear whether this forecast specifically accounts for the effect of stockpiling that may have occurred in light of the vast quantities of milk powders imported by China earlier in the year. In its recent quarterly dairy report, Rabobank states that this will be a key determinant of China’s purchases over the coming months.

While China’s milk powder imports have declined from the record highs in January, data to May shows that volumes were still tracking well above previous years’ levels. Despite strong demand, increased global milk supplies have contributed to a 30% fall in the GDT price index between April and July. The level of import demand from China will play an important role in determining when commodity prices recover from the current downward trend.