China's Milk Production Soars as Prices Plunge to 12-Year Low
Source: The DairyNews
In China, the expansion of large-scale dairy operations coupled with a drop in feed costs has led to a significant increase in milk production while pushing prices to their lowest in over a decade.
As of now, the price of liquid milk stands at 3.23 RMB per kilogram, the lowest rate since the Chinese government began tracking this data 12 years ago, continuing an 18-month trend of declining prices.
This increase in domestic production is occurring alongside a downturn in the market for imported infant formulas, primarily due to a declining birth rate in China. Recent data fr om New Zealand's Ministry for Foreign Affairs and Trade (MFAT) reveals a sharp 17% decrease in infant formula exports to China, totaling $410 million in the first four months of the year, a decline from a high baseline set in 2023 when New Zealand companies swiftly adapted to new Chinese registration regulations for infant formulas.
Despite these challenges, China's dairy production continues to grow, albeit at a slower pace, with a reported 1% increase in May year-over-year, following a 2.3% rise in April. According to Stu Davison, a senior manager at High Ground Dairy, while the production rate is moderating, the overall supply trend remains upward. However, the current price level is forcing many dairy farmers, particularly independents not affiliated with large processors like Mengniu or Yilli, into financial distress. These farmers are responding by culling cows and shifting to cheaper feed options to minimize losses, a direct consequence of high production costs driven by reliance on imported feeds like U.S. hay and corn.
Moreover, a significant shift in the infant formula market is also underway. Trade data indicates a 31% year-on-year decrease in China's imports of the product, as confidence in local brands grows and demographic trends reduce demand. This trend is reflected in broader shifts within the dairy sector, wh ere self-sufficiency has increased from 70% to 85% over the past four years, suggesting that China may soon transition from a major importer to a key exporter of dairy products.
This transformation in the dairy market is poised to reshape global trade dynamics, with potential implications for international dairy prices and market shares. Notably, the implementation of new labeling regulations and a strong preference for locally produced dairy goods are altering consumption patterns within China, favoring New Zealand over European Union products, thanks in part to more favorable trade agreements.
This increase in domestic production is occurring alongside a downturn in the market for imported infant formulas, primarily due to a declining birth rate in China. Recent data fr om New Zealand's Ministry for Foreign Affairs and Trade (MFAT) reveals a sharp 17% decrease in infant formula exports to China, totaling $410 million in the first four months of the year, a decline from a high baseline set in 2023 when New Zealand companies swiftly adapted to new Chinese registration regulations for infant formulas.
Despite these challenges, China's dairy production continues to grow, albeit at a slower pace, with a reported 1% increase in May year-over-year, following a 2.3% rise in April. According to Stu Davison, a senior manager at High Ground Dairy, while the production rate is moderating, the overall supply trend remains upward. However, the current price level is forcing many dairy farmers, particularly independents not affiliated with large processors like Mengniu or Yilli, into financial distress. These farmers are responding by culling cows and shifting to cheaper feed options to minimize losses, a direct consequence of high production costs driven by reliance on imported feeds like U.S. hay and corn.
Moreover, a significant shift in the infant formula market is also underway. Trade data indicates a 31% year-on-year decrease in China's imports of the product, as confidence in local brands grows and demographic trends reduce demand. This trend is reflected in broader shifts within the dairy sector, wh ere self-sufficiency has increased from 70% to 85% over the past four years, suggesting that China may soon transition from a major importer to a key exporter of dairy products.
This transformation in the dairy market is poised to reshape global trade dynamics, with potential implications for international dairy prices and market shares. Notably, the implementation of new labeling regulations and a strong preference for locally produced dairy goods are altering consumption patterns within China, favoring New Zealand over European Union products, thanks in part to more favorable trade agreements.
