China's demand for milk powders picks up

China continues to cut back on its purchases of milk powders in the global market, a worrying sign for dairy-exporting countries, especially Oceania. However, a shift in the type of dairy products that China continues to purchase could be good news for U.S. dairy exporters if trade wars don’t erupt under the new Trump administration.

According to China’s National Bureau of Statistics (NBS), the country’s economy grew an estimated 5% in 2024, driven by exports and investment. Betty Berning, analyst with the Daily Dairy Report, noted that while growth was better than analysts expected, “weak consumer spending coupled with the fallout from the real estate crisis remain ongoing concerns.”

China’s population also declined for the third year in a row in 2024, according to NBS. As the country’s population shrinks and ages, a declining workforce will create ongoing challenges for China’s economy, said Berning.

“China’s dairy business, which is essential for dairy-exporting nations, is a sizable piece of the global import pie. However, it seems likely that China’s piece of the pie could shrink, or the product mix could shift, as the country adjusts to an older population and economic issues,” Berning said.

China’s imports of ultra-high temperature (UHT) milk have been particularly weak. The country purchased 27% less UHT milk in December than it did in 2023. For all of 2024, China’s year-over-year purchases of UHT milk plummeted 24%—the lowest annual value since 2015, Berning noted.

In December, China imported more than 95 million pounds of whole milk powder (WMP), more than double December 2023 volumes. Yet despite December’s large purchases, China’s year-to-date imports of 899 million pounds of WMP were 5% smaller than in 2023 and less than half the record-high set in 2021. The country’s year-over-year skim milk powder imports in December also rose but were down a steep 34% for the year vs. 2023.

While China’s full-year imports of milk powders and UHT milk declined, the country’s interest in other products has been picking up. For example, China imported a record 28.4 million pounds of butter in 2024, and 2024 cheese shipments, although down 3% from 2023, were formidable nonetheless, Berning said. Cheese imports in 2024 were the third largest on record. Whey imports, which were down 1.3% for the year, also ranked as the third largest.

At the same time total dairy product purchase volumes have declined, domestic milk production in China has also slowed after increasing for several years. That has left Chinese processing companies with less milk to produce into WMP and other dairy products.

“Demand for WMP in China was not great in 2024, and that offset lost milk production,” Berning said. “But given December’s strong import volumes and recent price strength at the Global Dairy Trade auctions, WMP demand could be returning and will remain a wildcard worth watching in 2025.”

Source: Dairynews7x7 Jan 29th 2025 - Dairy herd management by FRAN HOWARD