The Chinese government is trying to slow speculative property development in that country. If that real estate bubble bursts, it will hurt all of the world's economies and dairy markets. But Australia and New Zealand, in particular, are driven by exports to China.
Chinese citizens have lost faith in the quality of its domestic dairy production. That's why it has been the major dairy importer in recent years. Imports of skim milk powder increased four-fold from 2008 to 2012.
Where feed costs are headed
Current corn and soybean futures prices are above new crop bids based on short old crop supplies. The markets presume additional corn and soybeans will become available later in the season, due to further export declines or greater certainty that the 2013 crop will be better here and in South America.
Note: The western Corn Belt is still very dry, especially Nebraska.
Penn State's measure of income over feed costs fell by 9.4% in February – the third straight monthly drop from November's peak of $9.10 per cow per day. February's IOFC was almost exactly the average value of the past four years.
Remember, IOFC reflects daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day. Most of the IOFC change was due to a lower milk price, although the cost of feeding a cow rose by 9 cents per day to $6.10.
Alfalfa hay was up 5% and soybean meal was up 6%. Corn was down 2%. This combination raised feed costs by 1.5%. Milk prices fell 9.5%.