China's economy seems to be strengthening but the global dairy import giant's appetite for trade may not be so robust, says Rabobank Shanghai-based senior dairy analyst Sandy Chen.
"Chinese milk production has remained firm and food service consumption soft. Chinese stocks are mounting and the lower import demand will be a key factor for Australian exporters," he said. Speaking on a recent Rabobank podcast, senior analyst Chen said that basic dairy market fundamentals in China would maintain some weakness in the Oceania dairy commodity prices during the coming months. "The next six Global Dairy Trade events will be critical in setting the commodity and farmgate prices for this region," he emphasised.
The analyst pointed out that China is ahead of the curve in its economic recovery. However, consumer demand remains slow, with retail and food service sales still lower year-on-year. This suggests that the industrial sector and investments rather than consumer spending is driving China's headline GDP growth. After decreasing during quarter one, Chinese dairy processing volumes have gradually returned to positive growth since quarter 2. But they remained slightly depressed, down around 2.5% year-on-year.
With the exception of whey, which remained strong, imports of liquid milk equivalent into China year-on-year were relatively flat - down slightly at 2 to 3% year-on-year during the first half of 2020 . This is surprisingly positive given the market circumstances, according to analyst Chen.
Source: Dairy Global