China’s Appetite for Consumer Dairy Products Grows

China’s economic growth has slowed dramatically from pre-pandemic gains as the country continues to implement Covid restrictions. China’s appetite for some dairy products, however, has grown as consumers look to value-added products and the country’s pork industry recovers following devastating outbreaks of African swine fever that began in 2018.

According to Sarina Sharp, analyst with the Daily Dairy Report, China imported healthy volumes of cheese and butter last month. Cheese imports were up nearly 23 million pounds in September, a 7% rise from September 2021, while butter imports grew by 13.8 million pounds, up 47% from the previous year, according to Trade Data Monitor.

“For both cheese and butter, China imported more last month than in any other September, which suggests that demand for dairy is resilient, despite concerns about the Chinese economy,” Sharp said.

Growth in China’s third-quarter gross domestic product (GDP) of 3.9%, increased by 0.4 percentage points from the second quarter but was still well below the country’s target growth of 5.5%.

The other dairy product that China imported in large volumes in September was whey. These imports climbed more than 11% compared to a year-earlier to 138 million pounds.

“China’s whey imports in September were the highest volume in 14 months,” Sharp said. “Better margins for hog producers have propelled China’s whey imports above prior-year levels for two straight months.”

Year-to-date whey shipments to China from all suppliers through September were still about 25% lower than the same period in 2021. However, U.S. shipments of whey to China for the same nine-month period set a new high due to August’s record-breaking dry whey exports to China of 74.4 million pounds, she said.

After building stocks in 2021, China has been scaling back on milk powder purchases since February. According to Trade Data Monitor, China imported 66.3 million pounds of whole milk powder (WMP) in September, down 16.2% from September 2021, and 55.3 million pounds of skim milk powder (SMP), off 17.8% from the previous year. China’s year-to-date imports through September of both WMP and SMP now trail 2021 imports by nearly 17%.

“New Zealand remains China’s top supplier of WMP, but its share of the market dropped below 80% in August and September, implying that Kiwi milk powder stocks were likely running low ahead of the 2022-23 season,” Sharp said.

New Zealand share of China’s SMP market has also declined. The country accounted for just 15% of China’s SMP imports in September, dropping behind Australia and the United States in market share.

Looking ahead, Sharp said economic concerns and China’s ongoing Covid restrictions as well as its sweeping lockdowns could continue to chip away at demand.