August 14, 2014

 

 

The EU and the US saw their largest growth in dairy exports as key exporting countries increased their milk production in the past year.

 

Fonterra's latest Global Dairy Update reports that export growth rates for the EU and the US are tailing off, while New Zealand's have increased in recent months.  Global demand for dairy has dropped in response to oversupply, while China is currently working through its stockpile.

 

Nevertheless, the USDA reports that underlying demand from China will continue to be driven by increases in incomes, urbanisation and population.

 

ASB economist Nathan Penny said that higher production in the EU and US reflected the opportunities exporters saw. ''The question is around the US, whether they can increase their export share because their production is still pretty modest but the potential is there for them to switch production into exports. At present, only 15% of their production goes into exports.''

 

While export growth from the EU dropped, it still remained 12% ahead in May 2014 compared to May 2013.  New Zealand's export rates showed an upward trend in April and May this year, at 10% growth. Milk powder exports from the country, the EU, Uruguay and the US were mainly responsible for the global export growth.

 

Meanwhile, cheese export rates fell off in May for New Zealand, the EU and Australia.

 

Cheese exports to Russia from the EU have fallen by 11% in 2014.

 

New Zealand's milk production in July reached 24 million kilogrammes of milk solids, two million kilogrammes ahead of the same period the year before.

 

Penny admits the difficultly of drawing conclusion from the July figures, since production was traditionally at its lowest then. Last July's production was only 1% of total production for the year, he said.

 

Production from Argentina and Uruguay, on a par with that of Australia, has fallen by 6.3% following poor weather and unsettled economic situations.

 

Penny added that there was potential in the short-term for New Zealand to find a market in Russia, but he predicted the Russian economy would ultimately slow, with demand easing for dairy and other products.