China’s 50 percent increase in dairy imports in 2013 reflects this structural change, as well as sluggish growth in Chinese milk production as small, inefficient producers leave the sector as part of the Government’s efforts to raise the quality of raw milk production. But cyclical or temporary factors are also in play.
These include the 2013 drought in New Zealand, severe climatic conditions in Asia, and an outbreak of foot and mouth disease in China. The strong supply response from the US, Europe and New Zealand, as a result of the high global dairy prices, is expected to exert downward pressure on international dairy prices over the next two to three years.