China bouncing back?

Westpac senior agri economist Nathan Penny notes that after growing at a paltry 3.5% over 2022, the Chinese economy should grow at around 6% over 2023.

"Already, we are seeing this impact in some of our export markets," says Penny.

"Sheepmeat markets have firmed and mutton and lamb flat prices, products popular in China, have jumped over the past few week. Similarly, export log prices have picked up, surging by around 20% since the start of the year."

In contrast, global dairy prices have largely yet to budge.

Penny points out that since the start of the year, overall prices have slid by around 5%, while whole milk powder prices have fallen by around 1%. The latest Global Dairy Trade (GDT) auction saw whole milk powder prices down 1.5% to US$3228/metric tonne.

"The exception to this overall weakness is butter prices, which have firmed by around 3% so far this year despite dropping in last week's GDT auction," he says.

"And this is the first sign that dairy demand is improving as Chinese consumers enjoy their newly found freedoms and head back out to restaurants, cafes and bakeries, places that use large quantities of butter."