China's dairy imports jumped 26% in June year, European output slowed, Fonterra says

Thursday 18th August 2016

China's imports of dairy products jumped 26 percent in the 12 months ended June 30 while growth in European Union milk production slowed for a third month in May, signs that the global dairy market may be starting to return to balance.

Fonterra Cooperative Group's Global Dairy Update says European milk production growth is at its slowest since early 2015 and rose just 1 percent in May from the same month last year, for a 12-month gain of 4 percent. Milk output fell 2 percent in both Australia and New Zealand in the 12 months ended June 30 and US production gained 1 percent.

Global dairy exports, which lag behind production data as milk is processed and brought to market, remain strong based on data in Fonterra's monthly update. New Zealand dairy exports rose 7 percent in the June 30 year and were up 33 percent from the same month of 2015. Australian exports were up 8 percent in the 12 months ended May 31 and up 35 percent in the month of May from May 2015. EU exports climbed 12 percent in the year to April 30, while US exports fell 8 percent in the year ended May 31.

The US "continues to see increased domestic demand and less competitive export prices", Fonterra said. China led growth among dairy importers, with strong gains for whole milk powder, fluid and fresh dairy and infant formula. Imports in Latin American countries climbed 10 percent while imports into Asia ex-China gained 3 percent. Middle East and Africa imports fell 5 percent.

The update comes after the latest GlobalDairyTrade auction this week which saw dairy prices soar more than expected as signs that a worldwide supply glut is easing bolsters optimism about the outlook. The GDT price index gained 12.7 percent to US$2,731 and whole milk powder surged 18.9 percent to US$2,695 a tonne, adding to a 10 percent gain two weeks ago.

Fonterra today confirmed the final 10 cents per share payment of its previously announced dividend for the year of 40 cents a share. The company has projected 2017 earnings per share of 50-60 cents, reflecting "performance improvements across the business".

"The returns from the ingredients, consumer and foodservice businesses continue to grow in line with our strategy to convert more milk into higher returning products, particularly in important markets such as China, Malaysia, Indonesia, Sri Lanka, Oceania and Latin America," Fonterra said today.

(BusinessDesk)

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