China’s Dairy Powder Crisis: U.S. Exports Hit Historic Low – Structural Shifts Reshape Global Trade

U.S. dairy faces a crisis as SMP exports to China hit ZERO. Can they reclaim the market? The Bullvine dives into the numbers, geopolitical stakes, and strategies to survive.

EXECUTIVE SUMMARY: U.S. skim milk powder (SMP) exports to China collapsed in early 2025, with zero shipments in February—the first complete halt since 2019. This downturn stems from steep price disadvantages ($27/MT premium over EU/NZ) and China’s aggressive domestic production growth, which achieved 85% dairy self-sufficiency by 2023. New Zealand and the EU now dominate China’s SMP/WMP markets, leveraging tariff-free access and strategic product adjustments. Deflation (-0.7% CPI in February) and oversupply risks threaten U.S. dairy, particularly with new cheese capacity straining export-dependent markets. To recover, U.S. exporters must pivot to butter/cheese production, lobby for tariff parity, and innovate SMP blends tailored to Chinese processors. The stakes are clear: adapt or lose global relevance.

KEY TAKEAWAYS:

1. U.S. SMP Collapse: Zero exports to China in February 2025 reflect pricing gaps ($27/MT premium) and China’s self-sufficiency surge.
2. NZ/EU Dominance: New Zealand’s tariff-free access and EU’s geopolitical alignment capture China’s shrinking SMP/WMP demand.
3. Deflation + Oversupply: China’s economic slump and U.S. cheese overproduction risk price crashes and plant closures.
4. Strategic Imperatives: Shift to butter/cheese, demand tariff relief, and innovate SMP blends to regain market share.

February 2025 delivered a gut punch to U.S. dairy: SMP exports to China plunged to their lowest level since 2013, with zero shipments recorded for the first time since the 2019 trade war. As EU and New Zealand suppliers dominate, The Bullvine investigates why American dairy is losing ground and what farmers must do to survive.

The U.S. SMP Collapse: Price Wars and Domestic Surges

China’s skim milk powder (SMP) imports from the U.S. collapsed in early 2025, with January shipments down 60% year-over-year and zero exports in February—the first complete shutdown since May 2019. This crisis stems from two forces:

1. Price Disadvantage: U.S. SMP traded at a $27/MT premium over EU and New Zealand competitors in late 2024, driven by tight domestic supplies (-14% SMP production in 2024).
2. China’s Milk Self-Sufficiency: Rabobank confirms China achieved 85% dairy self-sufficiency by 2023, surpassing its 2018 target through large-scale farm expansions and improved yields. Domestic raw milk production surged 10 million metric tons (MMT) from 2018–2023, slashing import reliance.

Winners and Losers in China’s Shifting Market

China’s Strategic Shifts:

• WMP Imports: Projected to stabilize at 460,000 MT in 2024, down from 845,000 MT in 2022, as domestic production fills demand.
• Cheese & Butter: Butter imports surged 32% YoY in 2022, but USDA forecasts 2024 declines due to economic headwinds.
• Whey: U.S. remains China’s top supplier despite a 38,700t H1 2024 drop in global whey demand.

Economic Headwinds: Deflation and Oversupply

China’s -0.7% February 2025 CPI—the steepest deflation since 2020—has suppressed consumer spending. Key impacts:

1. Domestic Dairy Demand Stagnation: UHT milk imports stabilized after a 4.7% January 2025 drop, reflecting China’s push for self-reliance.
2. Global Glut: Rabobank forecasts 0.8% global milk supply growth in 2025, but China’s import recovery hinges on economic stimulus.
3. U.S. Cheese Overproduction: New processing capacity (+200M lbs/year) risks price crashes without export demand.

Geopolitical Realities and U.S. Strategic Failures

“The U.S. priced itself out of China’s market,” says a U.S. Dairy Export Council source. “Mexico is now our lifeline, but we need radical changes.”

Critical Errors:

• Trade Policy: No progress on China’s retaliatory tariffs (e.g., 10% on U.S. pork since March 2025).
• Competitive Blind Spots: EU butterfat shortages boosted New Zealand’s SMP/WMP exports, while U.S. prices lagged.

Recommended Shifts:

• Redirect SMP to Butter/Cheddar: Match EU/NZ’s product mix adjustments to align with China’s cheese demand.
• Lobby for Tariff Parity: Demand urgency in U.S.-China trade talks to offset New Zealand’s tariff-free advantage.

Provocative Takeaways for Dairy Farmers

1. “China’s SMP Door Is Closed—For Now.”
   1. With 15,000 MT/day domestic milk surplus and WMP self-sufficiency goals, China’s import recovery is a 2026+ prospect.
2. “Deflation Isn’t the Only Threat—Oversupply Is.”
   1. U.S. cheese plants risk closures if exports stall; hedge with Dairy Revenue Protection (DRP).
3. “Mexico Can’t Save Us Alone.”
   1. Diversify to Southeast Asia, where SMP demand grew 3.4% in early 2024.

The Bullvine’s Call to Action

1. Price Transparency: Publish weekly SMP benchmarks to compete with EU/NZ.
2. Innovate or Die: Develop high-protein SMP blends for China’s bakery sector.
3. Demand Policy Reform: Pressure Washington to fast-track tariff relief in bilateral talks.

Final Warning:
“New Zealand and the EU are rewriting global dairy trade rules. Will U.S. farmers adapt—or become collateral damage?”

Learn more:

1. How U.S. Dairy Can Outmaneuver China’s Self-Sufficiency Push
   Explores strategies for redirecting exports to emerging markets and adapting production to counter China’s domestic growth.
2. New Zealand’s Dairy Dominance: Lessons for U.S. Exporters
   Analyzes how tariff-free access and pricing tactics secured New Zealand’s 68% share of China’s SMP market.
3. China’s Deflation Crisis: What It Means for Global Dairy Prices
   Breaks down the ripple effects of China’s -0.7% CPI on dairy demand and global oversupply risks.

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