China and Dairy market
Continuing growth of milk production and falling demand from China were the ingredients of a weakening of prices on the (international) dairy market. Gradually the supply and demand situation became more vulnerable as market threatened to get out of balance. Market sentiment got negative. Potential buyers were waiting and anticipating still lower prices. This was already reflected on the recent GlobalDairyTrade auctions, where prices declined. Most important trigger was the build-up of inventory in China and falling demand in some emerging markets in response to high dairy commodity prices. Chinese demand in the world market remained suppressed as they have accumulated more than sufficient stocks and are now reducing forward purchasing.
When the Russian ban on dairy imports took effect at the start of August, European market felt the full impact and the existing down trend got extra momentum. Prices were falling fast. Especially for cheese (as a result of Russian import ban) and WMP (as a result of less demand on world market) export opportunities suddenly dried up. This will probably change the direction of milk flows. More milk will be diverted to SMP and butter production with continuing price pressure as a result. Until now it looks too early for prices to stabilize.
1 January 2014 and 3 September 2014 and index and trend:
Butter 409 295 72,1 ↓
WMP 379 235 62,0 ↓
SMP 330 205 62,1 ↓
Wheypowder 99 80 80,8 →
Gouda cheese ± 400 ± 365 91,3 →
For more information, see www.milkprices.nl from LTO and EDF.