China will continue to play a “critical role” in global dairy markets as the world’s largest importer but it is also on track to substantially boost its own milk production, a new report suggests.
Latest research from Rabobank shows that China is set to become the third largest milk-producing country in the world.
Although China is the largest dairy importer because of its large population, which is continuing to increase its per capita dairy consumption, government policies are also driving the country’s own milk production growth.
Michelle Huang, dairy analyst at Rabobank, said: “China will continue to have a significant role in the global dairy industry, with a further widening of the import deficit expected.
“In 2032, imports are likely to reach 15 million metric tons liquid milk equivalent (LME).”
Milk supply
However, Rabobank also expects that milk supply could expand in China from 41.5 million tons in 2023 to 47.4 million metric tons LME in 2032.
China’s milk production has tripled in the last 20 years because of strong government support and Chinese dairy processors investing heavily in the sector.
Government incentives have also encouraged the development of large-scale dairy farms leading to a substantial increase in the number of dairy cows.
Rabobank expects the number of dairy farms with more than 1,000 head to expand and dominate the Chinese dairy landscape and account for 56% of the country’s herd by the end of 2025.
“The most significant swing factors influencing domestic supply will be production costs, the availability of land, water, heifers, and capital, and future government policy.
“On the demand side, downside risks include weaker income growth, slow economic growth, and sluggish consumer demand,” Huang said.
In general, Rabobank expects that annual demand in China for milk could grow 2.4% on average between 2023 and 2032, with dairy consumption reaching 62.2 million metric tons LME by 2032.4
According to Rabobank, the Chinese economy’s growth and “rising disposable incomes” have resulted in a corresponding increase in demand for dairy products.
The Chinese government has also encouraged consumers to increase their dairy consumption with national guidelines suggesting a daily dairy intake of between 300-500g/person.
It also established a national school milk programme designed to encourage students to consume dairy products.
Despite the increase in milk production in China, Rabobank highlights in its latest research report that the country’s “import deficit” will continue to shape global dairy markets over the coming decade.
But there are some key factors that could impact the import gap – particularly on the domestic supply side including substantial investments in productivity.
Cost-efficiency improvements could also further reduce China’s reliance on imports, particularly of milk powders that are used in the production of flavoured milk drinks and infant and adult milk powders
