NZ Milk Price Could Hit $10/kgMS as Global Supply Eases
A 'tsunami' of milk from key exporting countries is winding down and this may be good news for New Zealand dairy farmers.
Low single digit growth can be expected in Chinese dairy consumption in volume terms. But New Zealand processors should be adapting rapidly to the structural change to higher value products now occurring, Chen told Rural News.
In the white milk category UHT is dominant, he says.
“Within that category the basic type of milk, white milk, has been declining over the past few years,” he says.
“Premium milk has been growing faster at high single digit rates. On average we are seeing the white milk category being quite stagnant in growth. Premium milk is more or less milk with 3.3% protein content and 3.5% fat content – pretty standard quality milk in NZ. In China the basic type of milk comes with a protein content of 2.9% to 3%.
“But consumers are increasingly moving towards a premium white milk and imported UHT liquid milk which by default is at the premium end and has better protein content than the domestic basic type of milk. That is one structural change within the categories.”
Yoghurt is another dairy category with rapid growth. That has been perceived as a value added product and health and functional features are being marketed around the product. Yoghurt is growing at about 10% a year.
A major category, infant milk formula, will continue to grow but the growth rate will not be as high as it used to be.
Between 2000 and 2013 the growth was about 15% a year but it will probably taper off to under 10% in 2020, Chen says.
In the next two years it should be slightly above 10% but it could taper off quickly in 2020.
“This is likely because of the mildly positive impact the relaxed childbirth policy had on the infant milk formula growth,” Chen says.
“The peak of the growth will be captured between 2016 and 2019 before it starts to slow down again. Response to this policy is lukewarm. I think there is still a fair bit of hesitation by young people as to whether to respond to this policy. One of the concerns is about the perceived high cost of bringing up children in China.”
In overall liquid milk equivalent terms the dairy demand has slowed down significantly from the fast growth period between 2000-2008 when it was growing nearly 20% a year.
However the dairy import gap in China will remain and a slight widening is expected from 20% last year to about 25% in 2022. In 2020, Chen says, the estimated gap will be 24%.
