Explore why China’s dairy imports are declining despite a global surge. Is it a shift to domestic production or a response to global environmental restrictions? Dive in to find out.
From the fourth quarter of 2023 up to February 2024, the world witnessed something remarkable in the dairy industry. Demand for dairy imports across the globe soared, exceeding every forecast and prediction. Interestingly, this trend did not seem to involve China. During this period, an astonishing elevation in global dairy imports was observed, a trend that impressively tracked new record highs on a 12-month rolling basis. The Middle East and certain parts of Southeast Asia were at the heart of this extraordinary surge. In an awe-inspiring display of resilience, these regions had successfully bounced back from a weak record of imports that plagued most of 2023.
Sharp Decline in Europe’s Dairy Exports to China
In February, data indicated that something unusual was happening in the European dairy market. Exports of EU27 + UK milk equivalent outpaced the forecasts, evidencing a 1.6% increase compared to the previous year. It’s noteworthy, however, that this figure doesn’t account for leap-year adjustments. Simultaneously, the reports showed a contrasting trend in shipments to China. There was a remarkable 31% plunge in exports when set against the same period last year. What could be driving this paradox?
The Reason Behind the Pullback: Increased Domestic Production and Weaker Demand
Could this drift in Chinese dairy imports stem from changes within China’s borders? That’s a strong possibility. The United States Department of Agriculture (USDA) reports a steep rise in domestic milk production in China. In 2023, Chinese factories pushed out an impressive 41 million tonnes of milk, marking a 4.6% lift from 2022 and a substantial 28% surge compared to outputs in 2019.
This shift could wield a major influence over global dairy demand and pricing. However, before drawing rapid conclusions, it’s important to bear in mind the insights of Nate Donnay, StoneX Director of Dairy Market Insights. Donnay cautions that Chinese production data warrants a healthy degree of skepticism, as it doesn’t completely account for all the milk output within the country and can be vulnerable to fluctuations and inconsistencies.
Increasing Chinese Domestic Capacity: A Shared Industry View
Despite reservations expressed over the accuracy of data, there’s a consensus in the dairy industry: China is making substantial strides to boost its domestic dairy production capacity. Evidently, the Chinese government has been instrumental in this development, actively advocating for an increase in both production and consumption of domestically produced milk. Why such a move, you wonder? The motivation is clear: to lessen their reliance on imported liquids and powders.
The Potential Domino Effect of New Environmental Restrictions
It’s worth pondering if China’s strategic shift towards domestic dairy production has been shaped by recent environmental restraints. Consider the European Union and New Zealand—two significant dairy-producing regions worldwide. They’ve been steadily firming up their environmental regulations, actions that have promising potential to curb milk production and exports in the not-too-distant future.
Both regions send a stark signal to the rest of the dairy world: the golden era of boundless and ever-increasing milk supplies may be nearing its twilight. We can’t help but ask, has China got wind of this change in the air? Their proactive steps towards enhancing domestic production suggest the affirmative.
