February 3, 2010

China's import alert may push down dairy prices

There are concerns that global dairy prices will continue to fall after the Chinese government took steps to curb imports. 

Fonterra's global dairy sale has recorded a second straight monthly drop, with prices now almost 10% down since the year started.

The latest fall came after China issued an import alert over surging volumes of foreign dairy products.

Chinese demand still appears strong, but that may not continue, said analyst Tim Hunt.

"Put it this way, if prices had fallen substantially, we might be speculating that we had seen a drop-off in Chinese buying in response to that," he said.

What is happening at the auction suggests that the market is really fairly stable after falling in January, he said.

This is a fairly modest fall in the latest auction results and suggests that there is reasonable Chinese buying still, he commented.