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May 5, 2012

 

China's dairy imports up 25% despite drop in milk powder buying

 


Despite a return to decline in purchases of whole milk powder, Chinese dairy imports jumped 25% last month, raising questions over levels of its untapped demand left to take to a key auction on Tuesday (May 1).

 

China shipped in more than one million tonnes of dairy products, with purchases of whey-based products soaring 45%, data from Global Trade Information Services showed.


The figure more than offset a 1.7% drop in whole milk powder purchases - the ninth month in the last 10 in which imports have shown an on-year decline.


"February's rise in whole milk powder imports is beginning to look a bit of an aberration," a UK dairy analyst told Agrimoney.com.


China's imports of whole milk powder in February rose more than 20%. The data came ahead of the next globalDairyTrade auction at which producers are hoping for an improved result, after the last event, two weeks ago, saw dairy prices plunge to their lowest since October 2009, in the depths of the world financial crisis.


However, last month's buoyant Chinese import data did not mean that prices can recover much ground on Tuesday (May 1).


"I would be surprised to see another big decline, but the market cannot rely on China. The concern is that Chinese buyers are not so busy, after big purchases earlier in the year," the trader said.


Chinese buyers were incentivised to buy milk from China earlier in the year thanks to a reduction of 5.8% in tariffs on imports from New Zealand, the top dairy exporter, up to quota levels.


New Zealand supplies accounted for 96% of China's whole milk powder imports last month.


Booming production has been seen as the major factor behind weaker prices, with New Zealand production soaring by 9.1% in February, once the extra day in the month this year is factored in. Over the 2011-12 year, which started in June in New Zealand, the country's output has risen by 10.6%, with other major producers seeing rises too.


Australian milk production has risen by 4.1% over the season, with output in the US in March up 4.2%, on year.


"Analysts believe the latest price corrections are justified," analysts at the UK-based DairyCo bureau said.


"Global commodity prices are continuing on a downward trajectory as supplies outpace demand."

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