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2017 China Dairy Industry Analysis

  •   14 Mar 2018
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Rising incomes and increasing urbanization largely drive the growth in China’s demand for dairy. China dairy industry has developed steadily since 2014. In 2017, however, influenced by various domestic and global factors, the Chinese dairy sector entered a new period. This article looks at the general situation of China’s dairy industry in 2017, and briefly outlines some key issues.                                             

1. Dairy Production

According to National Bureau of Statistics (NBS), in 2017, the output of dairy products reached 29.35 million tons in China, with year-on-year growth of 4.2%. Major production provinces such as Hebei, Inner Mongolia, Henan and Shandong all reported an increase in dairy production. There were about 611 dairy producers in China with total sales of CNY 359.041 billion, with a year-on-year increase of 6.77% and profits of CNY 24.487 billion with a year-on-year decrease of 3.27%. Unprofitable enterprises (110) accounted for 18% of all these producers, and their total losses increased compared to the previous year. The reasons for this are as follows: high prices for some raw materials (i.e. white sugar), high cost of domestic dairy production and freight, and the large volume of cheap dairy imports.

Regarding specific categories of dairy products, the output of liquid milk in 2017 in China was about 26.92 million tons, decreasing 1.66% year on year. There were 9 provinces in which the annual liquid milk production was over a million tons, including three provinces (Jiangsu, Hubei and Sichuan) which are not part of the primary milk production regions.

The output of solid dairy products in 2017 was 2.43 million tons, with year-on-year decrease of 4.97%. 8 provinces had production of more than 0.1 million tons, accounting for 75.3% of the country’s total production. Among these 8 provinces, some places such as Tianjin, Sichuan and Guangdong had a low output of raw milk. They produced such a large amount of solid dairy products mainly by using imported dairy products as raw materials.

Different from the above two categories, compared with 2016, milk powder production in China in 2017 rose by 1.04% to around 1.21 million tons. The five provinces with output in excess of 50 thousand tons include the major dairy producers such as Inner Mongolia and Shandong.

2. Dairy Imports

Because of the increased demand for dairy and consumers remaining wary of domestic dairy product quality and security, imported dairy products were still an important part of the Chinese dairy market. According to China Customs data, more than 2.4 million tons of dairy products were imported into China in 2017, increasing 13.46% year on year with a total value of USD 8.541 billion which increased 40.27% year on year. Specifically, the import volume of milk powder was 0.7181 million tons and its import value was USD 2.168 billion, respectively rising at 18.9% and 46.7% year on year. The import volume of whey powder, mainly used as a raw material in infant milk powder, was 0.5296 million tons with a year-on-year growth of 6.5%, which underscores an increase in domestic infant milk powder production. Compared with last year, the import volume of cheese in 2017 increased by 11.1% to 0.108 million tons and its import value increased by 18.6% to USD 0.497 billion. In addition, 91,600 tons of cream were also imported into China in 2017, increasing 11.9% year on year.

It could be seen from the Customs statistics that while New Zealand and EU were two major importers of cream and milk powder, more than half of imported whey powder was from America and over 50% of the imported cheese was from New Zealand.

3. Dairy Product Quality and Safety

In 2015 China published its new food safety law and in 2017 finalized the food safety law implementation rules along with promulgating several important new regulations, putting in place the framework for implementation of China’s most advanced food regulation system to date. From January to September 2017, China Food and Drug Agency (CFDA) inspected 1169 batches of dairy products, and the qualification rate was up to 99.6%. Among the 5 unqualified batches, four were imported dairy products and all of them were unqualified because of excessive pathogens. From January 2017 to November 2017, CFDA inspected 2432 batches of infant formula milk powder, and the qualification rate was 99.72%, only 7 batches were unqualified. The qualification rates of dairy products and infant formula milk powder both reached the highest levels ever recorded in 2017. CFDA also released 34 batches of registered infant formula in 2017. Totally 952 infant formulae from 128 enterprises were approved, including 35 oversea firms with 203 formulae. By the end of 2017, 1330 applications of formula registration altogether were submitted, and there were still nearly 600 formulae which had not received any registration approval.

 

In summary, compared with 2016, the output of dairy products in 2017 in China and the import volume of dairy products both increased. Affected by changing consumer demand (a desire more for health and wellness rather than taste and convenience), increasing incomes and development of online shopping, China's consumption of dairy is expected to further grow. Domestic and also international dairy manufacturers now have greater opportunities than ever before but also face even stricter competition and heightened technical barriers to trade. However, with the increasing quality of domestic dairy products continually improving and imported dairy facing significant pricing pressures, international manufacturers now face greater challenges than ever to successfully enter China's markets.

 

ABOUT THE AUTHOR

Emily Zheng

Food Regulatory Analyst and Operations Specialist at ChemLinked

LinkedIn Profile: https://www.linkedin.com/in/emily-zheng-5a3a2297/