The average monthly price of New Zealand WMP in November dropped by 4.8% month-on-month (m-o-m), to USD 3,420/MT. The New Zealand WMP price had reached a record high in March 2022, at USD 4,730/MT, but since then it has steadily eased.
Lack of demand was the main driving force behind this downward price performance. Buyers have been waiting for New Zealand WMP prices to return to more affordable levels before committing to purchases, thus impacting demand levels. New Zealand exports just over 95% of its WMP produce, and less than 20,000 tonnes are consumed domestically. Thus, New Zealand exports are the best barometer of Asian demand for WMP, particularly Chinese demand. New Zealand is the main WMP supplier to China, representing almost 50% of total Chinese WMP imports. As a result, weak demand from China accelerated the WMP price drop since its peak in March 2022. New Zealand WMP exports to China were down by 43% during the January to October 2022 period, dragging down New Zealand WMP exports to 14% y-o-y, at 1.050 million tonnes.
Mintec expects that the impact of reduced exports to China will continue for the next three months and may recover in March 2023, as the impact of COVID-19 lockdowns has resulted in more domestic Chinese milk being channelled into WMP production. Additionally, the New Zealand 2022/23 milk production season, which started on the 1st of June, has been disappointing so far, with output down by 4.7% y-o-y for the June to October 2022 period. Usually, the end of October is the time of peak seasonal milk collection, but it will be difficult to recover lost potential from earlier in the season. Also, better pricing of dairy products, such as butter, anhydrous milk fat (AMF) and skimmed milk powder (SMP), is starting to take precedence over WMP for milk processors. Eventually, the shortage in WMP supply will offset lower Chinese demand and WMP will start to rise.
