Chinese demand returns, sending prices soaring
Chinese buyers are returning in force to replenish stocks and helping send global dairy prices higher.
That's the prediction from Primary Industries Minister Nathan Guy who says for the last six to eight months the GDT has been bouncing around a lot and it looks like that will continue for some time.
Guy says the reason for the market volatility is not new and the extra 3% more milk coming out of Europe is adding to a world that has more milk than consumers want to buy.
"But I am always hopeful it is going to stabilise and improve. The medium-long term outlook for dairying is good and we know that the historical price over 15 years is $5.25. My view is that they will get through this season and I am always hopeful the outlook for next season will be more optimistic."
Guy says there is now a great deal of focus on what's happening with the Chinese economy, which is going through structural turmoil.
But he says it's important to remember that NZ is not the only country affected.
"I think about 124 countries call China their number-one market so it's competitive and every industry has to continue to add value to their products."
Guy says he believes it will take another couple of years for the US to rebuild its beef herd and this is good news for NZ farmers.
"Most farmers who have sheep have some beef and that has cushioned the effect of lower lamb prices. Wool has started the year very positively so there are good signals from returns right now.
"Overall, the primary sector is looking good in certain sectors and volatile in others," Guy adds.
