China's growing demand is still crucial for the balance of the global milk market - Michael Harvey

According to him, China's demand for milk powder from New Zealand in 2021 exceeded many expectations. China's demand for milk powder in the next 3 months will be crucial for the direction of prices. In addition, solid purchases are observed in the markets of Southeast Asia. Lower prices recently would be welcome news for some buyers.

‘We certainly see that the Delta strain has an impact on many economies, clouding the prospects for opening markets. The rapid increase in the number of cases of the disease leads to further blockages and restrictions on mobility, a decrease in consumer confidence and a weakening of economic conditions. This can have a negative impact on the consumption of dairy products, and also leads to a serious distortion of supply chains, as a result of which the catering channels suffer greatly, which leads to a decrease in demand for butter, cream, mozzarella,’ the expert said

Michael Harvey also added that recent significant changes in GDT volumes might affect the prices of exchange-traded dairy products in the short term. Milk production in New Zealand is growing seasonally adjusted and will reach its peak in October. As a result, the supply is growing. The peak milk supply in New Zealand still depends on weather conditions, but there are conditions for a "normal" seasonal peak. Currently, demand in China coincides with the release of the product to the market; this allows companies operating under the free trade agreement to take advantage of a preferential tariff window since January 1, 2022 until the quota is filled.

‘The results of the latest GDR auction show that the consequences of COVID-19 are still being felt. The market fundamentals have remained mostly favorable in terms of prices in recent months. The supply growth continues, however, shows a very modest pace. The demand for dairy products remains stable, despite the disruptions due to the rapid spread of the COVID-19 delta strain among the unvaccinated population, the situation with which is getting out of control in many regions, which forces the governments of the countries to re-impose restrictions,’ he concluded.

Earlier, we reported that on August 23, Dairy Index DIA amounted to 29.04 rubles (about 0.33 euros)/kg (excluding VAT, fat and protein content 3.6% and 3.0% respectively), which is 0.45% higher than last week and 5.9% higher than in late August 2020. According to the Index DIA application, the key factor in the growth of the index was an increase in the import price due to an increase in the price for skimmed milk powder at the BUCE auction, a weakening of the ruble and an increase in the share of the most expensive pair of skimmed milk powder + butter in the calculation of the indicator, the weighted average price of milk in Russia also increased. 

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