Production, consumption and imports on the rise in Chinese dairy markets

Published 21 June 18

Chinese production of milk in April increased by nearly 2% year-on-year, according to the latest report from Rabobank, with expectations of a 2.5% increase in the second half of this year. The main driver is increasing yields, as the number of cows in milk is expected to remain relatively stable between 2017/18. Additionally, large investments into cooling, improving capacity during the warmer summer period, will also support the growth in production.

Consumption growth remains strong following on from 2017, with consumer confidence hitting a 10-year high during Q1 of 2018. Some domestic dairy-processing companies reported up to a 14% year-on-year growth in earnings. As such, domestic demand for liquid milk, cheese, butter and SMP are all expected to increase.

With growing domestic demand continuing to outstrip growth in production, net dairy import volumes grew by 11% in Q1 2018 and are expected to be similar to the record high levels seen in 2017.

While the short-term outlook for the Chinese dairy markets is looking up, ongoing trade tensions bring a level of uncertainty to forecasts. The simmering trade dispute with the United States could potentially have negative impacts on economic growth, exchange rates and domestic demand. Read more here about the US-China trade dispute.