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Chinese demand for dairy products continues to increase

A KEY feature of dairy markets in the last year is the growth in dairy product imports into China following so quickly on the back of declines in production in both New Zealand and the EU, according to Nick Holt-Martyn of the Dairy Group.

He said: "The recovery in production in the last six months in both these main dairy product exporters is expected to continue and markets will be dependent on Chinese consumption to maintain the current price levels."

Mr Holt-Maryn pointed out that, considering the recovery in the EU and New Zealand production, and the likely effect on the amount of product for export in 2014 the fragility of dairy markets to rising supply is clear. China can't be expected to raise its consumption because the EU and NZ have a favourable production season, so there would appear to be market risks later in 2014.

The US Department of Agriculture (USDA) published its latest forecasts in December 2013 for supply and demand which shows a recovery in milk production in 2014 by 4.2bn litres with NZ adding 5% and the EU 1%.

China's own production is forecast to improve by 10%. On the demand side rising incomes in Asia (+4.2%) and China (+7.7%) in particular are maintaining growth in dairy demand which is holding markets stable at high levels.

Chinese demand for milk powder is expected to grow by 16-20%, which the USDA estimates is in line with both increases in production and exports from the key exporters.

For 2014 at least, supply and demand look set to remain stable, which really means markets operating within a relatively narrow band of +/- 10% with any large movements not until the EU peak has passed and the shape of the NZ new season becomes apparent. With production growth expected in Australia, Argentina and India as well, then supply and demand is finely balanced.

Market round-up

The Cumberland and Dumfriesshire Farmers Mart had 25 prime cattle forward in Dumfries on Wednesday when heifers sold to 237.5p per kg and averaged 221.5p, while bullocks peaked at 221.5p and levelled at 213.2p.

There were 88 OTM cattle presented in the rough ring when beef cows averaged 122.1p and dairy cows levelled at 100.3p.

The firm also sold 865 prime hoggs to a top of £112 per head and 251p per kg to average 199.4p .

The 558 cast sheep forward saw heavy ewes sell to £108.50 for Suffolks and average £64.49 (+£1.73), while light ewes peaked at £71,50 for Cheviots and levelled at £43.18 (-£3.36).

United Auctions sold 1063 store heifers at Stirling on Wednesday to a top of 300.4p and an average of 231.2p (+10.8p), while 1613 store, beef-bred bullocks peaked at 305.7p and levelled at 245p. Forty-mime store, B&W bullocks sold to 160.1p and averaged 156p (+5.6p).

In the rough ring 145 cows averaged 130.6p.

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