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Sunday, December 17, 2017
 Chinese Milk Powder Stocks to Fall Sharply, As Imports Dwindle  

Chinese whole milk powder inventories, a key driver of the global dairy market, will fall sharply this year, as expectations for imports are revised down, but from levels far higher than previously thought, US officials said.

 

Chinese stocks are seen twice as high as previously thought, but sharply lower 2015 imports will see the glut working through, pushing inventories to a three-year low by the end of the year.

 

The US Department of Agriculture's Beijing bureau has cast doubts on the accuracy of previous estimates of January 2015 whole milk powder stocks, leading to a bearish revision of demand forecasts.

 

"Trade sources report China has 300,000 tons in carry-over stock on hand, double the previous USDA estimate," the bureau said.  "These carry-over stocks are likely to suppress import demand for the remainder of 2015," it added. With swollen inventories, 2015 milk imports were revised down by 30% to 400,000 tons.

 

Whole milk powder consumption is forecast to see only modest increases, to 1.98m tons, up 7.3% from 2014, but down 1.4% from earlier USDA estimates for 2015.

 

China is a key driver of the global whole milk powder market, due to a very high level of demand for infant formula, and a deep rooted distrust of the scandal-ridden domestic dairy industry.

 

Chinese imports soared in 2013, before falling sharply away in mid-2014. The exact size of the inventory accumulated during that buying-spree is one of the most hotly contested issues in the dairy market.

 

The consensus is that dairy prices will not show strong recovery until Chinese stocks begin to dwindle, and imports pick up. The latest reports from the USDA suggest that this is unlikely to happen in 2015. 

 

However, in the longer term, Chinese whole milk powder stocks are seen falling to just 89,000 tons, 4.3% lower than previous forecast, and the lowest level since 2012, thanks to lower imports, and a rise in consumption.

 

Domestic whole milk powder production is also seen up on previous expectations, at 1.38m tons. The Beijing bureau ascribed the increase to "large milk producing companies turning more milk into powder to reduce losses".

 

The bureau also found that the companies were being forced to honour contracts to buy liquid milk from producers, leading to companies holding a surplus of fluid milk.

 

"Processors report that turning unwanted fluid milk into powder is the most economical way to deal with this surplus."

 

Expectations for UHT fluid milk imports have also been revised downward by 12.5%, to 350,000 tons, only 9.4% up on 2014, thanks to slower demand growth.

 

"Despite urbanisation and growing popularity of fresh milk, [this office] forecasts fluid milk consumption at 39m tonnes, a slight decrease from the previous USDA estimate as a result of a slowing economy," the USDA bureau said.

 

Source: Agrimoney

 


Posted on Thursday, May 28, 2015 (Archive on Thursday, June 04, 2015)
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