China Outlines Dairy Sector Goals during Two Sessions

COVID-19 hit China's dairy sector pretty hard. During the Two Sessions, Chinese policymakers discussed systems that should be implemented post-Covid to help buffer the dairy sector from a similar disruption. Key goals expounded during The Two Sessions include developing China’s cheese sector, establishing a long term purchasing and storage mechanism for raw milk powder, promoting sustainability and reducing environmental impact, developing self-sufficiency in the production of critical raw materials, increasing the scale of farms and optimizing the entire supply chain.

COVID-19 has severely impacted China's dairy industry. The pandemic has negatively affected both domestic and international stakeholders and seriously impacted supply chains, precipitating a precipitous drop off in demand which has translated to a significant increase in the price of key raw materials. During the two sessions this year, NPC members shared their opinions on how to facilitate the revitalization of China's dairy industry.

Shi Yudong, nutrition and health manager from Mengniu Dairy, pointed out the long term problems hindering China's dairy industry. The main issues are:

The industrial distribution is unbalanced. The majority of dairy resources are located in northern China.
The shortage of imported fodder/feed increases the cost of dairy.
Most whey powder, lactoferrin, and lactose (the major food ingredients for infant formula milk powder) are imported from overseas. The impact of COVID-19 on the supply chain has translated into a price increase on raw materials, further damaging China’s dairy sector.
China lacks adequate contingency plans to buffer the impact of severe supply chain disruption.

Shi Yudong suggested that domestic dairy enterprises could invest in developing China’s cheese sector to help deal with some supply & demand issues. Greater self-sufficiency in the production of key food ingredients such as lactoferrin and lactose can also be achieved by increased investment and development of high-tech dairy processing facilities.

Also, chairman of Junlebao Dairy Group Wei Lihua proposes that China establish a national long-term purchasing and storage mechanism for raw milk powder. One mechanism put forward is that during a crisis, raw milk powder is purchased and stored irrespective of any decline in demand. This would allow raw materials prices to remain stable and support vulnerable links in the supply chain like farmers.

Leng Youbin, chairman of Feihe Dairy, suggested that the competent authority should support the development of large-scale dairy farming. He also outlined that utilization of the most modern and environmentally friendly agricultural techniques is an important goal. Finally, Leng proposed that large-scale dairy farms should be supported by their own alfalfa plantations to guarantee the supply of fodder.