Bumper Chinese milk stocks hammer dairy prices
With prices falling, producers are faced with China inventories and increasing supply
Hopes of a "white gold" rush fuelled by booming Asian demand for milk and other dairy products have been dealt a blow as swollen stockpiles in top consumer China and a flood of supply pummel dairy prices.
Global dairy prices have fallen more than 40 per cent since February, according to the Global Dairy Trade, an auction platform run by New Zealand's Fonterra Co-operative Group, which controls nearly a third of the world's dairy trade.
Fonterra said average prices fell 8.4 per cent to a two-year low at the last two-weekly auction on Tuesday as volumes surged by almost a third.
Much of the blame for plummeting prices has been linked to a surge in Chinese imports of milk powder in the second half of last year following a series of food scandals and supply worries.
"China purchased very, very strongly in late 2013/early 2014 and bought more than they needed as it turned out," said Hayley Moynihan, Rabobank's director of dairy research in Asia.
"Our view is that as a result of the retail price increases in 2013, there has been a slowing of overall demand growth ... and it has consequently left the Chinese market with some inventories to get through at the same time as domestic production has improved."