Chinese Dairy Imports Shatter Records
May 21, 2021
The world’s largest importer remains hungry for dairy in all forms. China stepped up imports of every category of dairy product in April, relative to the prior year, with remarkable gains nearly across the board. Compared to April 2020, China imported 70% more whey powder and 68% more cheese and curd. By wide margins, China also boosted imports of skim milk powder (SMP), up 43%; butter, up 38%; and ultra- high temperature (UHT) fresh milk, up 30%. The year-over-year increase in whole milk powder (WMP) imports was relatively modest at 3.2%, but China still imported more WMP last month than in any April on record, aside from 2014.
April shipments added to already significant purchases in the first quarter. In the first four months of the year, China imported record-breaking volumes of cheese, butter, whey powder, UHT milk, and SMP. China’s WMP imports fell short of the sky-high volumes brought ashore in January through April 2014, but they were far greater than all other years.
USDA’s on-the-ground analyst in Beijing expects Chinese milk production to reach 34.6 million metric tons (MMT) this year, according to the recently published semi- annual report from the Global Agricultural Information Network. Although that would be China’s highest milk output since 2007, it would be just 0.6% greater than 2020 output. For years, China has prioritized modernizing and expanding its dairy industry. The communist party hopes to achieve dairy self-sufficiency, spurring big investments in massive operations.
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However, these ventures are still suffering through growing pains. “China’s dairy producers need to improve dairy herd genetics, address animal diseases, and meet a deficiency in qualified farm managers in order to make significant strides in dairy herd management,” the report notes. In the past five years, China has imported nearly 20,000 U.S. dairy embryos and thousands of dairy heifers from Australia, New Zealand, Uruguay, and Chile in an attempt to approve milk yields. Over the same period, China imported more than 6 MMT of U.S. alfalfa, to better mimic a U.S. dairy cow ration. Nonetheless, the average U.S. milk cow is roughly twice as productive as the average dairy cow in China.
Because China has not been able to grow milk output as quickly as demand, Chinese dairy imports are likely to remain high. That’s great news for dairy exporters around the world, especially in Oceania and Europe. China’s free trade agreements with New Zealand and Australia give their products a decided advantage. China taxes European exports at the most favored nation tariff rate, which allows Europe to compete for a healthy share of China’s imports, with the exception of WMP, where New Zealand reigns supreme.
Meanwhile, the United States remains handicapped by the trade war. China waived retaliatory tariffs on U.S. whey and alfalfa products, but Chinese importers must apply for waivers on other products on a cumbersome case-by-case basis. Without a waiver, U.S. dairy exports face tariffs that range from 35% to 47.5%. The United States produces high-quality dairy products with enviable efficiency, but due to less favorable trade policies, the industry is missing out on opportunities to sell its wares to the world’s largest market.