China looking to more added value imports – Rabobank

Published 24 May 17

At the latest Dairy Industry Newsletter (DIN) conference, Kevin Bellamy of Rabobank spoke about the SE Asian markets.

China is obviously the biggest player; however, changes in the country are starting to lead to different opportunities.

The product mix is shifting with an increase in demand for higher quality imports and safer domestic products. As well as this, the way Chinese consumers are purchasing products is altering, with more shopping online.

While infant milk formula is to remain a key product, largest areas of growth are expected in yoghurts, cheese, milk and butter (with a focus on health and welfare products) over the coming years.

Furthermore, consolidation in Chinese producers and limitations to on-farm expansion are likely to present more demand for imports.

However, while opportunities are available, consumption per capita is relatively low, compared to other export prospects in the world. Growth in consumption had risen sharply and between 2000 and 2013, with consumption per capita rising from around 10kgs to just over 30kgs. This growth though, appears to have slowed down, with the change between 2010 and 2013 up a few kgs.

 DIN - Rabobank 24.05.17

Source: Rabobank

A lot of this slowdown in growth was largely due to health scandals from 2008 while short supplies, slower economic growth and higher dairy prices dampened consumption post 2012. The expectation is for consumption to grow annually between 2-2.5% as we head towards 2020 (compared to the annual 18-20% seen from 2000 to 2008).

China is not the only country in Asia presenting opportunities though. Countries like Indonesia are expected to see population and GDP growth in the coming years, along with growth in dairy consumption.

These increases, combined with limited growth opportunities in their domestic supply, will stimulate a rise in imports. However, currently in the SE Asia region there is strong local and multi-national competition as well as volatile exchange rates, presenting challenges along the way.