Overall trend
According to the US Department of Agriculture forecast, China's dairy imports in 2023 are close to the level in 2022, global dairy prices are high, domestic production increases, and economic operation speed all affect China's dairy imports. It is estimated that the fresh milk production will be nearly 41.7 million tons in 2023. The increase in fresh milk production will promote the production of whole milk powder, and the output of whole milk powder is expected to be 1.1 million tons in 2023. The production of Chinese skim milk powder, cheese and butter is not high, and the output is relatively stable in 2023. Similar to 2022, the high import prices of fresh milk, whole milk powder, skim milk powder, butter and cheese will affect imports.
Fresh milk: is expected to produce 41.7 million tons of fresh milk in 2023. Affected by the growth of domestic production, economic environment and the relatively high global dairy prices, it is estimated that the import volume of fresh milk will reach 1.1 million tons in 2023.
Whole milk powder: is expected to produce 1.1 million tons in 2023, an increase of 3% over 2022. Affected by domestic milk powder competition, it is expected that the import volume of whole milk powder will be stable, maintaining at 750,000 tons. It is expected that the demand for whole milk powder in baking and other industries will remain eased in 2023, but due to the increase in domestic supply, the food processing industry will use whole milk powder instead of skimmed milk powder as raw material. Compared with the estimated consumption in 2022, marginal consumption has increased.
skim milk powder: The import price of skim milk powder has risen, and the production of whole milk powder produced by domestic excess milk sources has increased. Affected by this, it is estimated that the import volume of skim milk powder will reach 340,000 tons in 2023. Imported skim milk powder dominates consumption, and it is expected that the domestic skim milk powder production will stabilize at 25,000 tons in 2023.
Cheese: Due to the impact of the demand for hotels, restaurants and institutions on epidemic control measures, cheese demand and consumption are expected to decline in 2023, and imports will drop to 150,000 tons. Imported cheese still dominates consumption. As domestic dairy processing companies expand production, China's cheese production is expected to increase to 22,000 tons.
Butter: is expected to cause factors such as sluggish demand, global supply shortage and high butter import prices to drop to 130,000 tons in 2023. As imported butter dominates the Chinese butter market, butter consumption is also expected to decrease as imports fall. China's butter production is expected to drop to 12,000 tons in 2023 due to sluggish demand from food manufacturers.
. Fresh milk
(I) Production
is expected to produce 41.7 million tons of fresh milk in 2023, an increase of 3% from 2022. However, factors such as high feed costs, sluggish consumer demand and falling domestic milk prices are expected to reduce producers' profits and affect production growth in 2023.
China's fresh milk production growth is attributed to government support production policies, large investments of dairy companies, and the continuous import of more than 1.2 million high-quality dairy cows in the past five years. The "Action Plan for Improving the Competitiveness of the Dairy Industry in the 14th Five-Year Plan" released by the Ministry of Agriculture and Rural Affairs in February 2022 proposed that by 2025, the national milk production will reach about 41 million tons. As China's dairy industry grows strongly, the Ministry of Agriculture and Rural Affairs raises its estimates. FAS expects China's fresh milk production to exceed 41 million tons in 2023.
The relevant plans of the Ministry of Agriculture and Rural Affairs send policy signals to provincial local governments, encouraging them to continue to support the development of the local dairy industry. Heilongjiang, Jilin and other provinces in Northeast China responded to the central government’s call and have formulated subsidy policies to support local dairy cow feeding and fresh milk production, processing and sales. In addition, Liaoning Province plans to invest in the construction of the province's cold chain logistics network by 2025 to support the transportation of fresh agricultural products such as dairy products.
Some processors have stopped purchasing fresh milk from farms with daily milk production of less than 10 tons, and small-scale dairy farmers may face increasingly greater challenges. The increase in milk production of large-scale, with tens of thousands of cows will greatly offset the decline in milk production caused by small farms' exit from the market.
Table 1 Production, supply and consumption of fresh milk in China Data source: US Department of Agriculture
(II) Consumption
It is estimated that China's fresh milk consumption will reach about 42.8 million tons in 2023, and the growth of dairy raw materials such as whole milk powder will slow down. It is expected that both fresh and processed milk will increase, with the increase in processing milk volume particularly strong. Investments by small high-end dairy processors in low-temperature dairy products and processed dairy products such as yogurt and ice cream will also promote the growth of demand for fresh milk in 2023.
Figure 1 Average milk price in China (yuan/kg)
Fresh milk is mainly consumed in the form of ultra-high temperature dairy products. This milk has a long shelf life and does not require refrigeration storage. Fresh milk production is mainly concentrated in northern China while consumption is concentrated in eastern and southern China. For dairy products that require refrigeration and preservation, such as pasteurization and extended shelf life, continuous epidemic control and logistics disruptions will slow their growth. However, pasteurized milk and yogurt have been included in the national " Student Drinking Milk Program " in 2021, which will stimulate the growth of demand for such products. The output of other dairy products such as goat milk, camel milk is growing slowly. This type of market has a small share of the dairy market, which is a business opportunity for local producers.
(III) Trade
It is expected that China's fresh milk import volume will reach 1.1 million tons in 2023, but economic factors may affect the growth momentum of fresh milk imports. Consumption in China's wealthy cities will continue to drive the growth of demand for ultra-high temperature fresh milk.
Figure 2 China's fresh milk import volume (thousand tons) Data source: US Department of Agriculture
Based on China's import data, the average import price of fresh milk in the first three quarters of 2022 rose by nearly 15% year-on-year, and the import volume of fresh milk decreased by more than 20%. Among the top 10 sources of fresh milk imports in China, Australia and the United Kingdom are the only two exporters that have maintained year-on-year growth in exports during this period. After the COVID-19 pandemic swept the world, logistics disruptions, rising transportation costs and global supply shortages have caused global fresh milk import unit prices to soar.
Figure 3 Imported fresh milk price (USD/ton) Data source: US Department of Agriculture
2. Whole milk powder
(I) Production
is expected to increase to nearly 1.1 million tons in 2023, and increased by 3% year-on-year. It is expected that dairy processors will process seasonal excess fresh milk into whole milk powder in 2023. However, the cost-effectiveness of whole milk powder production is lower than that of fresh milk production. According to news reports, in order to promote the production of whole milk powder, major production areas such as Inner Mongolia will increase subsidies for the production of whole milk powder in 2023.
Table 2 Production, supply and consumption of whole milk powder Data source: USDA
(II) Consumption
It is estimated that the consumption of whole milk powder in 2023 is close to 1.8 million tons, higher than in 2022, but lower than in 2021. Affected by epidemic control and economic operation, some bread producers have poor performance in 2022. Bread producers are expected to remain in the process of recovery in 2023. Due to the growth of domestic whole milk powder production and the relatively high global price of skimmed milk powder, food processors are expected to increase demand for whole milk powder. Due to the above reasons, it is expected that the consumption of whole milk powder in 2023 will exceed the estimated consumption in 2022.
(III) Trade
Due to the growth of domestic whole milk powder production and inventory, it is expected that the import volume of whole milk powder in 2023 will remain at the level of 750,000 tons in 2022. Traders believe that imported whole milk powder has a longer shelf life and better quality. However, international logistics challenges have increased and exchange rate fluctuations affect traders' import of whole milk powder. It is expected that the high import prices of whole milk powder in 2022 will continue until 2023.
The average import price of whole milk powder in the first half of 2022 rose by nearly 20% compared with the high level in the same period last year. It is expected that New Zealand will remain the main supplier in 2023, followed by Uruguay and Australia.
Figure 4 Average price of imported whole milk powder in China (USD/ton)
Note: The above prediction comes from the relevant report of the US Department of Agriculture
This report is divided into 2 parts and will be published in the future. Please pay attention to
Compilation: Yang Xinyi
