Sep 21, 2014
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The U.S. dollar is gaining marginal strength against Australian and New Zealand currencies, which makes our dairy exports slightly less competitive.

"The weakness in the Australian and New Zealand dollars is tied to potential problems with the Chinese economy," says Jim Dunn, an agricultural economist with Pennsylvania State University.

"The Chinese government is trying to limit speculative property investment. China has been building expensive apartments and office complexes without any market to occupy these buildings for years, and this bubble might burst."

The Australian and New Zealand economies are tied closely to exports they send to China, says Dunn. Dairy exports are crucial to both the Australian and New Zealand economies, and a loss of even a portion of the Chinese market would be felt worldwide as more Aussie and Kiwi dairy products would become available for sale elsewhere.

"Chinese citizens have lost faith in the quality of its domestic dairy production and China has been the major dairy importer in recent years," Dunn says. "For example, China’s imports of skim milk powder have increased fourfold from 2008 to 2012."

But all that could change if the Chinese real estate bubble bursts. 


 

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