Continued demand for dairy imports from China expected

Published 2 January 19

China accounted for 26% of the world’s dairy imports in 2017, playing a key role in determining global price levels for dairy commodities. Almost all of China’s dairy imports are supplied by the five key producing regions*, although New Zealand (NZ) has by far the largest share of these imports, at around 40%.

With a strong season predicted for NZ milk production, continued demand growth in China is vital to help support market prices. Historically there has been a strong link between income levels in China (as measured by GDP per capita) and the country’s dairy imports. Changes to consumer diets, as more people move to urban areas and are exposed to a wider range of food products, has also boosted demand for dairy.

China Import Demand

Following on from a decade of double-digit growth, income growth has slowed in recent years and is expected to be in the region of 6.2% for 2019, according to the World Bank. While this would be expected to slow down dairy consumption growth in the year, and therefore import levels, there are other factors which may help to support continued growth in imports.

Of key importance will be the level of domestic supplies, particularly in relation to stock levels.  The impact of stock levels can be seen in the graph.  After imports exceeded the expected level in 2013 and 2014, imports dropped in 2015 as accumulated stocks dampened the need to purchase more product.

According to the latest Rabobank report, milk production growth has not kept up with consumption, and low year on year growth in imports has put pressure on inventories. With some concerns over the impact of US tariffs on input costs, production growth is expected to remain constrained, while consumption growth is expected to continue. This will have the impact of keeping China active in the global market to maintain stock levels, at least in the early part of the year when they are able to take advantage of reduced rate tariff rates for NZ products.

*EU-28, United States, Australia, New Zealand and Australia