«Central Asia Could Become the New Star of the Global Dairy Industry» - Dou Ming, Chief Analyst at Beijing Orient Dairy Consultants, Ltd., IFCN Expert from China

What major changes have occurred in the Chinese dairy market in recent years?
The Chinese dairy industry has seen remarkable transformations over the past two decades, par-ticularly in milk production and herd size. To put it in perspective, back in the year 2000, China’s total milk production stood at around 9 million tons. Fast forward to 2023, and this figure has sky-rocketed to approximately 42 million tons annually, marking a profound expansion in milk output. This growth is largely attributed to a significant increase in the number of dairy cows. Two dec-ades ago, China had around 5 million cows, but that figure has doubled to an impressive 10 mil-lion cows. However, it’s important to clarify that this includes not only specialized dairy cows but also those not exclusively bred for milk production.

In addition to the growth in the number of cows, we’ve also witnessed a substantial rise in produc-tivity per cow. Years ago, the average cow in China produced around 2.5 tons of milk annually. Now, through advancements in breeding, nutrition, and management, the average cow yield has dramatically risen to about 9.4 tons per year. This significant improvement in both herd size and individual cow productivity has been instrumental in driving the rapid growth of China’s dairy sector.

Moreover, technology has played a crucial role in this transformation. Large-scale dairy farms have embraced modern technologies such as automated milking systems and precision farming techniques, allowing for greater efficiency, enhanced productivity, and improved animal welfare. The industry has also experienced a shift fr om small, traditional dairy operations toward much larger commercial farms, enabling mass production at lower costs. Another key factor has been the improvement in herd genetics. The number of Holstein cows, a breed known for their high milk output, has grown substantially fr om about 2 million to 7 million, further contributing to the industry's rapid development.

Are there any significant challenges facing China's dairy industry today?
Sure, despite the remarkable advancements, the Chinese dairy industry faces several significant challenges that impact its trajectory. One of the primary obstacles is the instability in the market, particularly concerning milk prices. The Chinese dairy market heavily leans on liquid milk prod-ucts, with about 90% of the milk produced being processed into liquid milk for consumption. However, the price of these dairy products is highly volatile and fluctuates depending on the sea-son or even the month. Such price instability creates uncertainty for both dairy producers and con-sumers, making it difficult to predict market trends or achieve consistent profitability.
Another challenge unique to the Chinese market is the structural separation between dairy farms and dairy processing companies. In many European countries, dairy processors own the farms and thus have more control over the supply chain. In China, however, farms and processors operate independently, meaning dairy processing companies often dictate the price that farmers can sell their milk for. This creates a situation in which farmers are often at the mercy of processors who have significant control over farm-gate prices. As a result, many dairy farmers face difficulty ne-gotiating favorable prices for their milk, which leaves them in a vulnerable position. This struc-tural disconnect between production and processing is an ongoing issue that continues to affect the financial stability of dairy farms across China.

Could the rapid expansion of the Chinese dairy market have any adverse effects on the dairy industry in Central Asia?
I would say the opposite, as China's dairy industry has developed and advanced significantly in recent decades, there is a tremendous opportunity for knowledge-sharing and collaboration be-tween China and its neighboring Central Asian countries. The proximity of these regions creates opportunities for mutual exchange and learning that could benefit both sides.

Looking ahead, there are numerous areas for increased cooperation between the Chinese and Cen-tral Asian dairy industries. Central Asian countries have the potential to enhance their production efficiency and output by learning from China's more advanced dairy farming techniques and pro-cessing technologies. Similarly, China can benefit from the lower production costs and natural resources available in Central Asia, fostering a complementary relationship. Increased interaction through industry conferences, study group exchanges, and seminars could serve as a platform for sharing insights and best practices, promoting further development in the region.

It’s worth noting that historically, there has been limited interaction between the dairy industries of China and Central Asian countries, resulting in relatively little knowledge of each other’s de-velopments. However, as these industries continue to grow and mature, there is no doubt that col-laboration and exchange will increase, creating opportunities for both sides to learn from one an-other and drive mutual growth in the dairy sector.

How do you assess the potential for the development of the dairy industry in Central Asian countries?
The potential for Central Asia’s dairy industry to grow and develop is immense. For instance, in Kazakhstan, the average milk yield per cow is currently around 2.4 tons annually. While this fig-ure may seem low when compared to China’s current levels, it is similar to what China was expe-riencing about 20 years ago. Given the right investments in technology, infrastructure, and farm-ing practices, Central Asia could significantly improve its productivity and overall output. If Cen-tral Asian countries can harness technological innovations, improve herd management practices, and adopt better nutrition strategies, there is room to substantially increase their yields per cow.

Additionally, Central Asia enjoys the benefit of relatively low production costs, particularly when it comes to land and forage cultivation. This cost advantage gives the region a competitive edge that could help it position itself as a key player in the global dairy industry. Central Asia's ability to scale its dairy production could open doors for increased exports, particularly to neighboring China, which continues to experience strong demand for dairy products. By fostering better com-munication and knowledge exchange between Central Asian countries and China, the region could tap into China's growing market for dairy exports and secure new opportunities for growth.

Could you provide more details about the opportunities for Central Asian countries to ex-pand their dairy product exports to China?
China's dairy industry is characterized by high production costs, particularly for milk. Although domestic production has been steadily increasing year after year, the majority of China's output is focused on liquid milk products. However, China remains one of the world's largest importers of dairy products, with annual imports reaching the equivalent of 16 million tons of liquid milk. These imports include a wide range of dairy products such as milk powder, packaged milk, yogurt, and other dry dairy products. The majority of these imports come from key global suppliers like New Zealand, European countries, and the United States. This consumer demand differs from the domestic liquid milk market, reflecting a strong and consistent need for imported dairy products in the Chinese consumer market.

When we consider the dairy industries of Central Asian countries, it's clear that there is significant potential for growth and collaboration. For instance, Kazakhstan produces around 6.5 million tons of dairy products annually, Uzbekistan produces 12 million tons, and Turkmenistan produces ap-proximately 2.4 million tons. These countries are traditionally grazing nations, with abundant land and rich feed resources, which offer them a distinct advantage when it comes to the cost of milk production. In contrast, the cost of milk production in China remains relatively high. Based on the data we’ve reviewed, the average milk yield per cow in Central Asian countries is comparable to what China achieved over 20 years ago, suggesting substantial room for improvement in these markets.

How do you see the prospects for cooperation between China and Central Asian countries in the dairy sector?
The prospects for cooperation between China and Central Asian countries in the dairy sector are bright and promising. Due to the close geographical proximity between these regions, there is a natural opportunity to foster collaboration. One of the first steps toward establishing this coopera-tion could be for government bodies, dairy associations, or universities to organize delegations, forums, and events that facilitate greater interaction between industry leaders from both sides. A great example of such an initiative is the AqAltyn dairy conference scheduled for November, which provides a platform for industry stakeholders to come together and discuss potential areas for cooperation. By encouraging more dialogue and partnership, both China and Central Asia can unlock mutual benefits that could result in stronger trade ties and greater advancements in their respective dairy industries.

What Chinese innovations or approaches could be beneficial for the dairy industry in Cen-tral Asian countries?
The Central Asian region is rich in natural resources essential for dairy farming, particularly in terms of land and feed for cows. However, there is still relatively little known about the types of dairy products that are produced and consumed within Central Asia itself. For example, we have a deep understanding of the dairy industry in countries like New Zealand, which widely exports milk powder, or the United States, which exports whey powder to European countries. In contrast, when it comes to Central Asia, we lack a detailed understanding of the local market's structure and dynamics to recommend specific approaches and innovations. Yes, China has made great strides in implementing advanced technologies and practices in its dairy sector, such as automated milk-ing systems, precision agriculture, and enhanced genetic selection of high-yield cows. By sharing these innovations with Central Asian dairy producers, China could help accelerate the develop-ment of the dairy industry in the region. However, currently, there is limited understanding be-tween China and Central Asian countries about each other's dairy industry needs, challenges, and opportunities.

At this point, I believe that for China to effectively support the development of the dairy industry in Central Asia, there needs to be an expansion of cooperation and knowledge-sharing initiatives. This can be achieved, as I mentioned earlier, through organized industry workshops, bilateral meetings, or delegation exchanges between the two regions, allowing for the exchange of valuable information and practical strategies.

In your opinion, how will global trends in the dairy industry affect the markets in China and Central Asia in the coming years?
Recently, during my visit to Japanese dairy companies, a significant discussion was held regard-ing the global dairy market. The consensus from these discussions highlighted that both demand and supply in the global dairy industry are projected to increase in the future. However, developed countries, which face higher production costs, will see these trends affecting them differently. Due to the elevated costs associated with dairy production in these developed nations, many industry experts believe that Central Asian countries, among other developing dairy regions, are poised to emerge as key players in the global dairy market. So Central Asian countries can be a new star of the global dairy industry in the future, because these countries are expected to become prominent suppliers of dairy products in the near future.
Central Asia, with its abundant resources and lower production costs, is positioned to fill the gap left by developed countries. This shift will likely lead to a significant increase in the role these nations play in the global dairy supply chain. As the global demand for dairy products rises, Cen-tral Asian countries are anticipated to become more integral to meeting this demand.

Turning to China, the dynamics of the dairy market are similarly influenced by global trends. Cur-rently, local dairy production in China accounts for approximately 70% of the total dairy supply consumed within the country. The remaining 30% is imported from international sources. Given China's large and growing population, it is expected that both domestic dairy production and im-ports will continue to expand in the future. This growth is reflective of the broader trend wh ere the overall demand for dairy products worldwide is on the rise.

Does this mean that in the future the countries of Central Asia can become leaders in the global dairy industry?
The global dairy industry is projected to grow, driven by increasing consumer demand and ex-panding markets. Developed countries are facing constraints related to resources and high produc-tion costs, which may lim it their growth potential. In contrast, developing dairy markets, such as those in Central Asia, are positioned to become significant contributors to the global dairy supply. These countries have the potential to meet a growing share of the world’s dairy needs.

But China, too, will continue to play a crucial role in the global dairy landscape. With its substan-tial domestic dairy production and growing import needs, China is set to remain a major player in both the production and consumption of dairy products. The import of dry dairy products, in par-ticular, is expected to continue its upward trajectory, reflecting China's expanding demand for these goods.

In summary, as global trends evolve, Central Asian countries are likely to become increasingly important in the global dairy market due to their lower production costs and abundant resources. Concurrently, China will continue to play a significant role in the global dairy industry, with growing production and import needs driven by its large population and rising demand.

And finally, we would like to point out that you are one of the main speakers of The 2nd Cen-tral Asian Milk Congress - AqAltyn in Kazakhstan. What are you going to talk about in your presentation at the event?
In preparation for the upcoming AqAltyn dairy conference in November, I intend to conduct thor-ough research on the dairy industries in Central Asia to gain a better understanding of their pro-duction capacities, challenges, and market structure. I will focus on identifying the types of dairy products primarily produced in these countries, such as whether they predominantly produce liq-uid milk, cheese, or other dairy items.This analysis will help me draw meaningful conclusions and identify key points to highlight in my presentation.

Additionally, I plan to invite our industry representatives to attend the event to foster networking and collaboration. After the conference, I suggest organizing visits to dairy farms in Kazakhstan to provide a firsthand look at the dairy farming practices and advancements in the region. This would offer valuable insights and enhance our understanding of the local dairy industry.

I believe, this event will serve as a platform for mutual learning and collaboration, much like the exchanges China has had with countries such as New Zealand, Australia, European nations, and the USA over the past 10 to 20 years. These interactions have historically led to deeper under-standing and strengthened partnerships, and I anticipate that this event will achieve similar out-comes.

Mr.Dou, thank you for the interview! Looking forward to see you at AqAltyn!