US sector’s pain could be NZ’s gain as China looks for new suppliers.
The implications for the global dairy industry of United States President Donald Trump’s tariff war were front of mind for those at the American Dairy Product Institute’s annual conference in Chicago last month.
NZX head of dairy insights Cristina Alvarado attended the global gathering, where, she said, “every conversation started with ‘What do you think is going to happen with the tariffs?’”
A lot of it was “wait and see”, Alvarado said.
“There’s still a bit of disbelief that it’s happened, and they have the hope that the tariffs will be removed or reduced or negotiations will soften it a bit.”
For New Zealand, this opens up an opportunity, she said.
“China might look to New Zealand to see if it can provide that. But right now, New Zealand has no product because we’re in the down of our season.”
The impact of Chinese buyers looking elsewhere was seen in the latest GDT, where lactose jumped 16.8% to US$1611 a tonne and the GDT price index leaped 4.6% to US$4516 a tonne.
If the high tariffs continue into spring production, that could see demand stay strong, Alvarado said.
Over the longer term, there are lots of consumer products that could see a cost increase if the tariff war continues, and this is not just the ingredient itself, but also the packaging that goes into the product.
If that occurs, demand will fall among US consumers because they will not be able to afford it.
“But that won’t be immediate. Everyone is thinking in about a year’s time we’re going to see that consequences of that if the tariff issue doesn’t get resolved.
“If it stays at the levels we are seeing right now, that’s what we are going to see. That’s when it’s going to become a problem, not just for the US but it will affect the market globally for different countries.
“So, the best opportunity for NZ now is to try and prepare and be able to provide for all of those products that China is now not going to be getting from the US.
“There’s going to be an impact and we can take advantage of it in the short term, but the problem is in the longer term and how that is going to affect the market.”
US dairy producers at the conference are also increasingly concerned at falling milking cow numbers and its impact on milk production. Beef prices are so high that its more attractive for farmers to sell their replacement heifers to that market than to keep them for their milking herd.
“They are paying for a one-day-old calf, US$800-$900 – that’s what one of the companies told us.”
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