Global Dairy Trade: China lockdowns stifle milk demand

While the rest of the world has moved on, China is still chasing zero Covid, and it’s affecting the global dairy market.

International dairy prices have been soaring for most of the calendar year — but lockdowns in China’s largest cities are taking a toll.

The Global Dairy Trade index — the leading barometer for the milk export market — has fallen slightly overnight for the second consecutive time, although from a high base.

The headline trading figure stands at $US4981 ($A6571) — confirmation that the extraordinary price rise witnessed between January and March has tapered off.

Whole milk powder slipped 1.5 per cent to an average $US4532 ($A7978) per megatonne while butter softened slightly, down 0.6 per cent to an average $US6891 ($A9089) per megatonne.

Shanghai — China’s foremost trading port — has recorded more than 73,000 coronavirus cases since the latest outbreak began a few weeks ago.

Unlike much of the western world, the Chinese Government has maintained a zero-Covid strategy, relying on lockdowns to curb the spread of the virus.

Westpac NZ economist Satish Ranchhod said whole milk powder prices were relatively stable, despite market demand cooling in recent weeks.

“Nonetheless, prices remain very high, having lifted 20 per cent since the start of the year,” Mr Ranchhod said.

“While the impact of the Russia-Ukraine conflict is putting upward pressure on global dairy prices, the Omicron outbreak in China and the subsequent impact on dairy demand is countering this pressure.”