Economy

China's imports of NZ milk jump five-fold

By Phoebe Sedgman (China Daily)
Updated: 2011-03-10 09:40

The milk powder section of a supermarket in Qingdao, Shandong province. Chinese consumers' sustained demand for foreign-brand milk powder products has helped the economy of quake-suffering New Zealand. [Photo / China Daily]

WELLINGTON, New Zealand - China's milk imports from New Zealand have surged more than fivefold since 2008 as rising incomes stoked demand, sending prices to a record and bolstering the economy as it recovers from the deadliest earthquake in 80 years.

China, the biggest importer of New Zealand dairy products by value, purchased about 353 million kilograms of the country's milk products in 2010, up from 69 million kilograms in 2008, according to government data supplied by Fonterra Cooperative Group Ltd, the world's largest exporter. Fonterra processes 95 percent of the country's milk and earns a fifth of its export revenues, the company said.

New Zealand is relying on China and other emerging markets to buy more dairy products to rekindle economic growth after a contraction in the quarter ended Sept 30. Asian consumers are demanding more protein as incomes and nutrition levels rise, said Con Williams, rural economist at ANZ National Bank Ltd.

"Milk's going to be an important component because it's about 25 percent of export earnings," Williams said. "It's going to be a cornerstone in terms of earning overseas dollars and then getting that through the economy".

Prime Minister John Key said on March 2 that there's likely to be "virtually no growth" in New Zealand for the financial year through June. The economy might have contracted in the fourth quarter of 2010, entering its second recession in two years, Finance Minister Bill English said last month.

An economic recovery may be slowed by the 6.3-magnitude earthquake that struck the South Island city of Christchurch on Feb 22, killing more than 160 people and causing an estimated NZ$15 billion ($11.10 billion) in damage.

Economic growth in 2011 is expected to be 1.5 percentage points lower because of the temblor, according to the Treasury Department. A "small contraction" in real gross domestic product is predicted in the March quarter, compared with a 0.5 percent growth forecast before the quake, it said on March 6.

High prices for New Zealand's commodity exports may help Christchurch recover from its second quake in six months, English said on March 1. Export prices rose for a sixth month to a record in February, according to the ANZ Commodity Price Index.

Whole-milk powder prices surged 41 percent in Fonterra's last seven global auctions, prompting the company to freeze local wholesale prices for the rest of this year.

Related readings:  Prices of whole milk powder hit a record  70% refuse domestic powdered milk  Quality watchdog increases milk safety scrutiny

Prices reached a record on March 2 amid sustained demand from China and concerns that rising input costs may curb supply. Milk prices will likely remain at least 50 percent above historical averages in the longer term, Fonterra's Chief Executive Officer Andrew Ferrier said on Feb 14.

As developing nations' incomes rise, diets are expected to include more meat and processed foods, favoring dairy and livestock, according to an annual outlook from the Organization for Economic Cooperation and Development and the United Nations' Food and Agriculture Organization last June.

Global food prices have surged on increased demand coupled with harvest disruptions, including a drought in China, as well as heavier-than-usual rains across parts of Asia.

Bloomberg News