China becomes New Zealand's top dairy market

Strong demand in China for milk powder following the deadly melamine scandal of 2008 has created a boom for New Zealand, the world's biggest exporter of dairy products.

 

New Zealand sold dairy goods to 151 countries last year, but China was the biggest customer by far, paying out NZD1.33 billion dollars (US$925 million), according to New Zealand's Ministry of Agriculture and Forestry.

 

It was the first year China had headed the list of New Zealand's dairy buyers although it overtook sales to New Zealand's traditionally large markets in the EU, headed by its former colonial power, Britain, for the first time in 2008.

 

China now spends more than twice as much on imports of New Zealand dairy products as the 27 members of the EU combined, which spent NZD515 million (US$358 million) last year.

 

The EU was the fifth-biggest market behind the US (US$695.5 million), Japan (US$412 million) and Australia (US$369 million), the ministry said in its annual inventory of the nation's farming industry.

 

The ministry said New Zealand's total agricultural and forestry exports to China rose 49% last year to NZD2.19 billion (US$1.52 billion), driven mainly by milk powder (US$424 million) and lumber.

 

The report noted that Chinese demand for New Zealand products soared with the drop in consumer confidence in domestic milk products after the widespread contamination of infant milk powder with the industrial chemical melamine, which killed six babies and put hundreds of thousands more in hospital.

 

It predicted the boom would continue with Chinese consumption continuing to rise and New Zealand production jumping rapidly as farmers recover from a drought that limited a predicted rise in output in the past dairy season, which ended May 31.

 

Commentators questioned the ministry's bullish forecasts of a 14% increase in milk production subject to favourable climatic conditions this season and a 58% rise in total dairy exports to NZD15.7 billion (US$10.9 billion) by 2013-14.

 

A spokesman for the Fonterra Co-operative Group Ltd, the world's biggest single trader in dairy products, said it could not confirm the ministry's figures because there were many variables, including exchange rates, commodity prices and production levels.

 

The ministry's director general, Murray Sherwin, acknowledged that dairy product prices had become volatile over the past few years and said rapid price shifts, up or down, could not be ruled out. He also cautioned that New Zealand should avoid becoming too reliant on one country as a market for its goods.