China’s slowing purchases of dairy products from New Zealand, particularly milk powders, could result in excess product on the global market. As China supplies more of its own dairy needs and eats down its inventories, it will continue to buy less milk powder, especially from New Zealand, said Betty Berning, analyst with the Daily Dairy Report.
According to a Rabobank report, decreased whole milk powder exports to China equate to 150,000 metric tons, or about 1.3 million metric tons of milk equivalent annually, about 6% of New Zealand’s annual milk production.
“This change in buying will pose challenges to New Zealand as well as to the global dairy industry, as the influx of product into the global market looks for substitute buyers,” Berning said. “Even though U.S. milk production is down from a year ago, and output growth in Europe and New Zealand is limited, the shuffling of the dairy export deck could mute the impact of smaller milk supplies, keeping prices from moving much higher than current levels.”
New Zealand, one of the world’s top dairy exporters, sends the bulk of its milk production overseas, mostly in the form of milk powders, and exports are crucial to the health of the country’s dairy industry, Berning said. New Zealand’s year-to-date whole milk powder through June were up 7.4% vs. the January through June period in 2023, but sales to China were down. New Zealand’s year-to-date sales of skim milk powder were 3.8% lower through June, compared to the first half of 2023, but 2024 sales will still likely be strong historically.
While New Zealand’s 2024-25 milking season is just beginning, milk collections have been trending lower since 2021. In June of this year, milk solids of 44.8 million pounds were 2.2% lower than the same month in 2023, which will continue to reduce the volume of milk available for powder production, according to Berning. Some in the New Zealand dairy industry expect milk solids to be down again in July before climbing into the new production season.
“Milk solids are the moneymaker for New Zealand producers,” Berning said. “Increased solids and a higher milk price will be important this season in helping producers there rebalance budgets and make a profit.”
According to Stats New Zealand, for the 12 months ending in April 2024, the country’s milk powder exports, worth $9.7 billion, accounted for 14% of the value of all exports, making it the country’s largest export commodity. Over that same 12-month period, 30% of New Zealand’s milk powder exports were sent to China.
