Dairy At Glance
China's Demand for WMP and SMP

This is an email of FAO which is quite interesting and I want to share it with my readers

 

Dairy Outlook is a service of FAO’s  Trade and Markets Division

The effect of China’s import demand on world WMP and SMP prices is an interesting on, where in both cases China is the main market.  For example, China’s imports of WMP for 2014 are provisionally estimated to increase by 35 percent, in which case they would approach 1 million tonnes – and account for almost 40 percent of total trade.

The slackening in China’s import demand was not the only element which caused the recent, sustained fall in world prices – especially as imports for the year are expected to be more than in 2013.  Looking at the graph below, the China effect seems to have had its basis more in the scheduling of imports, where from November to April purchases were substantially above average levels.  This is reported to have been a result of dairy companies in China building up stocks against a shortage of national milk supplies during the latter part of 2013 and moving into 2014.  Once adequate stocks were built up and 2014 milk production began favourably, the need to continue accentuated levels of importation was removed.  Consequently, a major underpinning element in world demand was removed and, in a context of strong international availability, contributed to the price fall.

In terms of forecasting international price based on demand from China and supply/demand/price interactions between the major dairying regions, I would agree that these are both important elements; however, there is little historical perspective to guide the process, as the important role of China as a dairy importer is recent.  In my view, the variation of international prices – with several circles of sharp price swings seen over the past 10 years or so  - has much more to do with availability swings in exporting countries rather than changes in world demand – which has always shown a positive trend, year-on-year. 

 

Michael

Tue, Nov 4, 2014 at 7:12 PM

Akshay Sadana

Posted Date : 04/11/2014 Posted By : Admin