Competition for China's dairy market

07 May, 2013 12:26 PM
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CHINESE demand for New Zealand dairy products has well and truly “kicked”, however there is not enough Kiwi supply to satisfy "the dragon’s" increasing consumption needs, providing opportunities for Australian dairy exports, according to a Rabobank dairy expert touring regional Victoria this week.

Visiting from Christchurch, Rabobank director of Dairy Research New Zealand and Asia, Hayley Moynihan is presenting to local farmers on the Sino-NZ dairy trade relationship, highlighting where the Australian industry can gain increased international market share.

Ms Moynihan is speaking in Colac, Warrnambool, Traralgon, Echuca and Shepparton.

Ms Moynihan said Chinese demand for dairy products had sharply increased with prices skyrocketing by more than 50 per cent over the past two months.

“This price spike has been driven in large part by the New Zealand drought limiting production potential for export, however this event shows how tight global markets are right now,” she said.

“When there is no buffer for a supply shock, markets respond with high prices. This is a ‘here and now’ story.”

Although dairy commodity prices have eased slightly since the peak in the recent spike, Ms Moynihan expects the market will remain at elevated levels until more product is delivered around spring this year.

Ms Moynihan said while the currency is strong in both Australia and New Zealand, partially eroding returns on dairy commodities exported, market forces have prevailed.

Regarding the free trade agreement (FTA) between New Zealand and China, Ms Moynihan said while the arrangement allows a specified volume of New Zealand product into China tariff-free, tariffs still apply on exports above this level.

“In reality, the FTA isn’t dictating overall competiveness for New Zealand, as the tariff-free volumes only represent around one fifth of the volume that China is importing – Australia is in a great position to make up some of that extra supply, even without a tariff-free provision,” she says.

“The Chinese dairy market has grown so much and Rabobank expects that consumption will continue to expand.”

Rabobank regional manager for Gippsland Scott Price is accompanying Ms Moynihan on the tour across parts of Victoria.

Mr Price said it’s been a tough few years for the local dairy industry experiencing unfavourable seasonal conditions and tight margins, however looking to the long-term, prospects of what has been taking place on the global stage looked positive.

“We need to keep an eye on these global signals so we can try to gauge what’s coming, particularly with the nature of how dairy commodities work with regard to forward selling,” Mr Price said.

Ms Moynihan joined Rabobank in 2001 and is a part of the bank’s Food and Agribusiness Research & Advisory division where she contributes to the analysis of global dairy markets.

She is a highly respected commentator on New Zealand’s agricultural sector and a sought-after speaker at international conferences.

In 2012, Ms Moynihan was recognised by Primary magazine as one of the top 10 women in agribusiness in New Zealand.

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READER COMMENTS

Jack McGann
8/05/2013 8:47:53 AM, on The Land

The market is ripe for us to secure a foot hold. We'll have a year to get this rolling but we need to do this ASAP
Boonah Bob
8/05/2013 11:33:29 AM, on Queensland Country Life

Develop the market with China as much as possible. The supermarkets and processors in Australia do not seem to appreciate the efforts our dairy farmers make to have fresh milk available every day of the year. As we are told business is business, so if a better price can be gained by exporting. Go for it!

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Will Bellevue Bill be feeding this to his poodle?
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" Worse". No just predictable, Nico. Some people can see a dollar to be made and some other
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"if the American people ever allow private banks to control the issue of their currency, first