Dairy producers all over the world are producing roughly 30 percent more milk than a year ago, yet prices remain near record levels. What gives? A recent analysis from the U.S. Dairy Export Council (USDEC) offers clues.
Chinese purchases have been heavy of late, but this buying spree is expected to slow, USDEC analysts say.
“China’s imports of milk powder, cheese, butterfat and whey in the September-January period were up a staging 66 percent from the prior year,” USDEC says in its Global Dairy Market Outlook. “Purchases aren’t likely to be as heavy in the months ahead; China typically buys 15-20 percent less in the second and third quarters compared with the fourth and first quarters.”
Still, USDEC doesn’t expect prices to fall far, or fast.
“For nearly a year, buyers have been reluctant to procure too far ahead, waiting for price declines that haven’t materialized,” the report says. “They still need to rebuild pipeline holdings, and they’re poised to purchase on dips in the market.”
But it’s not all hearts and flowers for dairy producers, USDEC adds.
“Of course, historically high commodity prices that have held for almost a year have priced some buyers out of the market and encouraged substitution in some applications and that could curb demand later in the year.”
Source: DairyHerd