Welcome to our weekly market update, in which we will tell you about the developments in dairy the past week and our expectations for coming week.
Welcome to 2023! We wish you all a very happy, healthy and successful new year. We've seen fireworks again at new year's eve, and we expect fireworks in the 2023 dairy market as well!
Everyone seems to be in agreement with the present situation. Supply is outpacing demand. This is mainly driven by high milk output in Europe combined with easing energy prices.
But our job is not to report yesterday's news, but to analyze the future. And it seems that Chinese demand will be an important factor in the near future. What we tend to forget is that China is a huge milk producer as well.
To put things in perspective, on this simple chart you can see China produces roughly twice the amount of milk that New-Zealand does. Or roughly the same as Germany and France combined! And the objective is to grow towards self-sufficiency. A change in milk production and usage in China could have large consequences for the global dairy industry.
Anecdotal evidence tells us that consumer demand is picking up a little bit. Having said that, the country still struggles with COVID outbreaks in the large cities.
In the past 2 years, many Chinese food producers have switched to locally produced milk instead of imported milk powder. This also slows down Import demand, but local stocks are not as high as they used to be.
A last thing to keep in mind is that the "first import", duty free window has been abolished. So don't get fooled by the year on year import statistics as demand will be spread more equally over the year.
We need to keep a close eye on demand developments, because supply is not going to change the current sentiment any time soon!
Thank you for your attention, we welcome your questions and remarks.