Why are China’s dairy imports dropping while domestic production rises? Learn how this shift affects global dairy markets and your farm’s future.
Summary: China’s dairy imports are on a downward slope, with significant declines in both whole milk powder (WMP) and skim milk powder (SMP) imports in July 2024. This drop reflects a broader shift in China’s domestic dairy production strategy. Despite diminished demand from China, other markets are slowly picking up the slack, helping to stabilize global prices. With China’s overall meat and dairy consumption falling due to economic pressures, the government is implementing measures to curb production and stabilize prices. Wang Lejun, the agriculture ministry’s Chief Animal Husbandry Officer, noted that beef and raw milk prices fell by 12.1% and 12.5%, respectively, causing losses for breeders. Global markets are adjusting to the drop in Chinese demand, with nonfat dry milk (NDM) prices rising to $1.2825 a pound, their highest level since January 2023, while emerging markets in Southeast Asia and the Middle East absorb the surplus production.
- China’s dairy imports, particularly WMP and SMP, significantly declined in July 2024.
- WMP imports dropped 3.5% year-over-year, and SMP imports plummeted 38% compared to July 2023.
- Other dairy product imports, including fluid and UHT milk, also fell by 38%.
- China’s increased domestic dairy production has lessened the need for imports, causing a surplus in the global market.
- Government measures are being implemented to curb dairy and beef production to stabilize prices amid economic pressures.
- Despite China’s drop in demand, other markets, such as Southeast Asia and the Middle East, are helping to stabilize global dairy prices.
- Nonfat dry milk (NDM) prices in the U.S. rose to $1.2825 a pound, their highest level since January 2023.
- Emerging markets are starting to absorb the excess production, easing the global supply glut.
- Beef and raw milk prices in China have decreased by over 12%, causing financial losses for breeders.
Have you ever wondered why Chinese dairy imports are down while local production is rising? China’s formerly unquenchable thirst for foreign dairy products is waning in an unexpected development. The July numbers reveal a sharp decline in whole milk powder (WMP) and skim milk powder (SMP) imports into China, with WMP imports down 3.5% from July 2023 and SMP imports down 38%. Meanwhile, China’s domestic dairy output continues to expand, changing global markets and producing rippling effects among foreign dairy producers. The ramifications of this trend are considerable, not just for Chinese producers but also for global dairy farmers who have long depended on China as a critical market. This article digs into the causes behind China’s shifting dairy environment and its implications for the global dairy business.
China’s Dairy Import Decline: A Deep Dive into Whole and Skim Milk Powder Trends
China’s dairy import scene has suffered notable damage, which has attracted the attention of industry watchers. Let’s examine the details.
Whole Milk Powder (WMP)
WMP sales to China declined by 3.5% in July 2024 compared to the same month last year, reaching 95 million pounds. The drop becomes much more pronounced when we look at the year-to-date numbers. Through July, China’s WMP imports fell 9% from the same month in 2023, putting 2024 on track to be the lowest year for WMP imports since 2015.
Skim Milk Powder (SMP)
The situation with SMP imports is much more extreme. In July 2024, China imported just 44.9 million pounds of SMP, representing a 38% decline year on year. The cumulative figures through July show a similarly gloomy picture; at 336.8 million pounds, China’s SMP imports are 36% lower than the same month in 2023.
China’s Domestic Dairy Boom Reshapes Global Market Dynamics
China has been working to strengthen its domestic dairy sector, and the figures show a significant shift. The country has intentionally reduced its dependency on imported dairy products, expanding its dairy herd from 5.7 million in 2001 to 7.1 million in 2023. Increased local output has impacted the global dairy market.
In 2021, China’s imports of whole milk powder (WMP) and skim milk powder (SMP) peaked. However, this high was short-lived. Fast forward to 2023, and these import statistics have plunged dramatically—WMP imports have almost halved, while SMP imports have dropped by more than 100 million pounds.
So, how does this affect the global dairy market? The ripple effects are significant. As China’s demand for imported dairy declines, an oversupply of these goods floods the international market, looking for new clients. Oversupply has positively impacted markets and placed pressure on global dairy prices.
China’s Dairy Demand Drop: Surplus to Resilience in Global Markets
China’s declining demand for dairy products, notably whole milk powder (WMP) and skim milk powder (SMP), is changing global dairy pricing. WMP sales to China fell 3.5% from July 2023, while SMP imports dropped by 38%. Naturally, this has resulted in a significant excess of these items worldwide. However, not all is doom and gloom.
Despite China’s decreasing hunger, prices for some commodities remain surprisingly resilient. For example, spot CME nonfat dry milk (NDM) prices have risen to $1.2825 a pound, their highest level since January 2023. In the most recent Global Dairy Trade auction, WMP prices reached a high of $3,482 per metric ton, the highest level since October 2022.
So, what’s keeping these costs up? First, dairy exporters are seeking alternate markets to absorb surplus production. Emerging markets in Southeast Asia and the Middle East are seeing rising demand, helping stabilize global prices. Second, decreasing milk production from other major dairy exporters has tightened supply circumstances, further boosting prices.
Despite China’s decreasing demand, the global dairy industry is proving its resilience by attracting new consumers and adjusting to changing conditions. This adaptability is crucial for preserving market stability and stabilizing pricing levels in the face of variable demand, reassuring industry stakeholders.
China’s Strategic Measures to Stabilize Meat and Dairy Prices Amid Economic Slowdown
According to Wang Lejun, Chief Animal Husbandry Officer at the Agriculture Ministry, China’s decision to reduce dairy and beef output is a vital reaction to the downward spiral of meat prices. With a mix of overproduction and declining consumer spending, China plans to avoid further price drops by deploying several strategic steps.
Wang brought out the need for urgency: “For beef and dairy cows, we want to guide farms to optimize and adjust the herd structure, moderately eliminate old and low-yielding cows, and better match production development with market demand.” This strategy balances supply with lower demand, so stabilizing the market.
The larger backdrop for this shift is a significant drop in beef and raw milk prices, which decreased 12.1% and 12.5% in the year’s first half. This price drop has left beef and dairy cow producers in financial distress, emphasizing the crucial need for action.
While pig companies had already started to reduce their sow numbers after restrictions were released in March, the new recommendations for beef and dairy farms aim to address similar dangers. As meat consumption continues to decline due to a sluggish economy, these actions are critical to avoiding additional market excess.
China’s efforts to improve herd structure and cull less productive cows are part of a deliberate strategy to match supply with more sluggish market demand. This intervention is designed to help farmers experiencing low prices while stabilizing the meat and dairy market, providing a sense of industry-wide cooperation and support.
Slowing Economy Tightens Consumers’ Purse Strings, Impacting Meat and Dairy Demand
The larger economic environment influencing China’s meat and dairy consumption fall is multidimensional. One of the crucial elements is China’s continued economic downturn, which directly influences consumer spending behavior. As economic development slows, disposable incomes fall, making consumers more cautious about spending, particularly on higher-cost food goods such as meat and dairy products. In this financial situation, the year’s first half saw significant output shifts across various industries. According to current statistics, hog output increased somewhat, but beef, mutton, and poultry production increased by 0.6%. Egg and milk output increased by 2.7% and 3.4%, respectively. However, this increasing supply occurs when demand declines, aggravating pricing pressures and producing producer losses.
The Bottom Line
China’s continual swings in dairy imports and local production significantly impact dairy producers worldwide. As China’s declining demand for whole and skim milk powder continues to disrupt global market dynamics, producers must negotiate a world where historical dependence on Chinese consumption is no longer guaranteed. When combined with China’s deliberate initiatives to stabilize dairy prices during an economic downturn, it’s evident that adaptation is essential in this changing market situation.
Understanding the market movements is critical for dairy producers. Embracing technological developments, broadening export markets, and optimizing manufacturing to meet shifting demand are all positive measures. As the global economy shifts in reaction to China’s internal policies, proactive methods will be critical to preserving competitiveness.
So, how can dairy producers adjust to shifting market conditions and remain competitive? Dairy producers can handle the difficulties and possibilities by being educated, embracing innovation, and remaining nimble in their business processes. Stay informed, proactive, and ahead of the curve in the ever-changing dairy industry.
