Global dairy markets may be beginning to improve following increased Chinese demand, according to the US Department of Agriculture (USDA).
In a recent forecast, the department said: “Global export prices of skimmed milk powder and whole milk powder have been rising recently, suggesting global milk powder markets may be in the early stages of a recovery.
“These recent increases in milk powder prices may be the first sign of a realignment of markets which are slowly coming into balance as the milk over-supply situation is corrected.”
But the USDA warned of heavy stocks of skimmed milk powder, which would ‘likely temper any significant recovery in prices’.
Chinese whole milk powder imports have increased by 20 per cent in May, compared to last year.
The USDA lifted its forecast for 2016 Chinese whole milk powder imports by 15,000 tonnes, to 375,000t, with the bulk of imports coming from New Zealand.
Chinese liquid milk imports were seen sharply up at 650,000t, with most imports coming from the EU.
In Europe, the USDA expected EU milk production to ‘slow significantly’ due to low farmgate milk prices. Despite milk prices falling, dairy product prices in Europe are booming.
Falling milk production has led to processors increasing or holding prices.
If global milk prices rise, it should support prices in the UK and an increase in global demand would be good news for British exporters.
The European Commission reported EU milk prices in May were down 4 per cent month-on-month, but butter prices were up 4.6 per cent in June and cheddar prices were up 2.4 per cent.
In New Zealand, the world’s biggest liquid milk exporter, the USDA increased forecasts to 21.1 million tonnes in 2016. However, milk production was still expected to drop 2 per cent year-on-year due to low farmgate prices.
The latest annual Rabobank survey showed the top 20 dairy companies posted combined dairy sales of $194 billion (£148bn) last year, down 13 per cent year-on-year, in US dollar terms.
However, due to how much the euro has weakened against the US dollar, the same collective turnover of the top 20 improved 4 per cent in euro terms.
Nestle remains the largest dairy company, followed by Lactalis, then Danone.
Muller was the highest climber, moving from 20th to 15th following its acquisition of Dairy Crest's dairies business. Unilever was the only company in the top 20 based in the UK.
Rabobank said ‘mergers have continued apace as companies continued to seek additional value from domestic markets and new opportunities elsewhere’ following contraction in the Chinese market.
Africa is now on the dairy map. There were 14 deals in Africa, with four more in 2016 so far. This compares with only three deals recorded in Africa in 2014.