CHINA is importing a fifth of its milk products and needs to rely on even more external supplies for at least the next two years.
Local milk production is struggling to cope with changes in the Chinese milk pipeline as small family dairies shut down.

Already clearly the world’s largest dairy importer, China is expected to be one of the key drivers of global dairy consumption growth for the next decade according to Rabobank.

Despite the fast pace of Chinese dairying sector developments, local production growth had stalled and imports would continue playing an increasing role in meeting demand.

In its report, China’s Raw Milk Supply: Still Dreaming of a White River, Rabobank said “backyard” dairy farming had declined, primarily due to inconsistent milk quality and new regulatory pressures.

But milk production had struggled to grow because so many small-scale farmers were exiting the industry and large-scale farms were still being developed said report co-author and Rabobank director of dairy research in Asia, Hayley Moynihan.

She said it was likely to be up to three years before the pace of large-scale dairy farm expansion in China outweighed the current contraction and lead to any reduction in import growth.

Ms Moynihan said the slowdown milk production growth in China had seen the country’s reliance on dairy imports rise 20 to 30 per cent annually since 2011.

“The surge in Chinese buying from a shrinking global supply pool has squeezed out many other buyers and held dairy prices at high levels,” Ms Moynihan said.

“Even when that rate of growth in imports slows, China will remain a major consumer of global dairy exports.”

China’s appetite for milk and dairy products has accelerated rapidly in recent years as consumers become increasingly affluent and adopt a more westernised diet.

Rabobank’s Shanghai-based senior dairy analyst Sandy Chen said while just over 80pc of the Chinese market was still supplied by domestic milk production, this supply remained under-developed with about 60pc from small-scale farms operating with less than 100 cows.

“The cows are typically raised in backyards and fed on forage grown on-farm, however the quality of milk is very inconsistent,” Mr Chen says.

In addition, milk from small producers was “pooled” at collection stations, providing infrastructure, organisational and logistic problems and heightening food safety risks.

But in the aftermath of the 2008 melamine powder substitution crisis, the Chinese government had taken steps to resolve supply chain issues and strengthen raw milk quality control.

The focus on milk quality in China post-2008 had also favoured large-scale dairy farms.

“The share of production of large-scale farms, with more than 500 cows, grew rapidly from 17pc of total milk production in 2008 to 27 per cent in 2011,” Mr Chen said.

Source: Queensland Country Life