Consumer thirst for dairy products in China is on the increase but there are big differences between the supply and demand in the country.
Since the melamine dairy scandal in 2008 when Chinese consumers lost faith in the country’s dairy industry, there have been big changes in the structure of farms in the country. A general distrust for some domestic dairy products has led to a consolidation of dairy farms into larger operations. In fact, the number of dairy farms with less than 300 head has dropped by 49% to 56,000, from a peak of 114,000 in 2011. As a result, the quality of milk as well as the prices have increased. In turn, farmers have increased production levels boosted by higher prices.
Forecasts for this year put China’s milk production at an increase of 2.3%, which is just as well because the consumption of dairy products in China is expected to increase by 2.5% to 33.7 million tonnes, according to USDA forecasts.
Even with continued large investments into China’s dairy production system, the national demand far outstrips supply. The country, therefore, relies on imports.
According to the Agriculture and Horticulture Development Board in England, imports of dairy produce into China between January and June this year increased 25% against the first half of 2018. The growth was driven by milk powders, with skimmed milk powder and whole milk powder imports up by 29% and 30.5%, respectively.
Demand for whey, common in pig feed, fell 28% in the first 6 months of 2019 as ASF continues to rampage across China where 5 million pigs have been culled or died as a result of the disease.
New Zealand remains the largest supplier to China, accounting for 52% of its dairy imports, while the EU is increasing its exports to the region with Germany leading the European suppliers at 12%.
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