UK milk price optimism as China faces up to dairy crisis
13 December 2013 | By Ben Briggs
STRONG global demand for dairy products will continue to drive a competitive price for UK milk well into next year, experts have claimed.
With many in the industry previously predicting a spring 2014 slump in farmgate prices as global supply stepped up to meet demand, there is now a suggestion global dairy commodity prices will remain buoyant.
Key to this has been figures from China which revealed two million dairy cows have been culled in the past 12 months. The reasons for this remain unclear but it has caused the national herd to drop back to about seven million head.
Chinese dairy production currently stands about 35m tonnes but, with demand at 40m tonnes, the gap has been plugged with imports, causing a raw milk price spike.
Robert Newbery, NFU chief dairy adviser and co-author of a new UK dairy strategy launched this week, said: “With China culling cows and no huge increase in output from Australia and New Zealand we will not see a drop in UK price this spring.
“In the UK we are nearing European dairy price convergence. The challenge is that as global demand grows, producers will not keep up and that will create tension in the marketplace and potentially push prices higher.”
The NFU, Dairy UK and DairyCo draft strategy, Leading the Way, was presented to the Defra Dairy Supply Chain Forum and aims to find a way of eliminating the UK dairy trade deficit value of £1.2 billion by 2025.
And while Mr Newbery said dairy price volatility could become the new norm, the global nature of the marketplace meant there were big opportunities for UK farmers and processors, something the strategy sought to find a way of exploiting.
Peter Dawson, Dairy UK policy director, and a fellow author of the strategy, added: “At present there is no sign global demand is reacting adversely to high prices and any displacement of Chinese demand onto the world market will help to sustain global demand trends.
“The southern hemisphere is coming to the end of its production season so the market will be driven by supply developments in the northern hemisphere.”
John Allen, of Kite Consulting, which has been analysing China’s influence on the world dairy market, said the ability of processors such as Arla, Muller Wiseman and Dairy Crest to trade on the global stage would be crucial for the stability of the UK dairy sector in the coming years.
He said: “If we produce a lot of milk next spring in this country we could have a wall of milk which could hold back the spot market and the UK milk price.
“We need businesses dealing in international markets and if we do not have that then we might not be able to get rid of the milk.”
see also
Sir David Attenborough condemns UK government for ignoring science - 'in quest to sell milk to the Chinese'
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