Milk prices sink as ‘white gold’ floods even demand

Source:Reuters Published: 2014-8-6 23:08:02

Hopes of a "white gold" rush fuelled by booming Asian demand for milk and other dairy products have been dealt a blow as swollen stockpile in top consumer China and a flood of supply pummel dairy prices.

Global dairy prices have fallen more than 40 percent since February, according to the Global Dairy Trade, an auction platform run by New Zealand's Fonterra Co-operative Group.

Fonterra said average prices fell 8.4 percent to a two-year low at the last two-weekly auction on Tuesday as volumes surged by almost one-third.

Much of the blame for plummeting prices has been linked to a surge in Chinese imports of milk powder in the second half of 2013 following a series of food scandals that sparked near panic buying.

"China purchased very, very strongly in late 2013 and early 2014 and bought more than they needed as it turned out," said Wellington-based Hayley Moynihan, Rabobank's director of dairy research in Asia.

"As a result of the retail price increases in 2013, there has been a slowing of overall demand growth ... and it has consequently left the Chinese market with some inventories to get through at the same time as domestic production has improved," Moynihan said.

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