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China Dairy Market Overview & Outlook

11th January 2021

Suki Wu, Market Specialist China, Bord Bia - The Irish Food Board

The overall dairy production in China keeps continuous growing in past 3 years, it grew by 5% in 2019, which achieves the highest growth rate since 2015. The industry had some challenges caused by Covid 19 in the beginning Of the virus outbreak, however it recovers stably since April, and the dairy production grew by 7.9% growth in June 2020. But comparing with the same period from Jan to June last year, the dairy production dropped by 2.5%.

Seen from the dairy stock market in the first week of 2021, the stock price of majority of domestic leading dairy enterprises are growing significantly, with about over 10 dairy stocks climbing by the 10 percent daily limit. The stock price of both Yili and Mengniu grew averagely over 7%. Why the dairy stock price rise so quickly? The reason behind is that the raw milk price is growing which result in growing dairy price. Due to the profit loss of dairy farms in the beginning of 2019 and tightened environmental protection policy, the number of domestic dairy cattle decreased, and some small sized farms were eliminated from the market. On the other hand, the consumption for plain milk increased due to health and nutrition concerns after Covid-19 outbreak.

According to statistics of Ministry of Agriculture and Rural affairs of China, the domestic milk price grow continuously in last 4 months and grew by 15% since last May with a 5.7% YOY. The contracted milk price is around 50 cents. And the un-contracted milk price reached to around 75 cents. Based on different milk price and milk consumption scenarios nationwide, Shanghai milk association has issued a declaration that the standard raw milk price is fixed at 50 cents from 1st Jan 2021 to 30th Jun 2021 within Shanghai area, based on discussion with Bright dairy group and regional dairy farmers.

According to China Customs, dairy imports from Jan to Nov 2020 reached to 2.97 million tons, grew by 9.5% YOY. The imports of bulk powders decreased by 2.1% YOY reached to 901 thousand tons, imports of infant formula decreased by 4.3% YOY reached to 306 thousand tons. Imports of cream, whey, cheese and milk increased significantly, the cheese imports increased by 11.5% YOY, cream imports increased by 34.3%, whey imports increased by 38.6%, and milk imports increased by 13% YOY.

2020 is a special year for whole of the world, industry players had realized the importance of supply chain, and they started to invest heavily on supply chains such as buying farms and factories domestically, they are trying to lower down the impact relying on overseas supply and transfer it to local supplies, especially for those international players. The other development focus for dairy industry is rural vitalization. President Xi has mentioned in his 2021 New Year greetings that the rural vitalization will be the focus after poverty alleviation.

China dairy companies are still facing challenges on milk powder business in 2021, small medium size milk powder brands might be eliminated from the market due to accelerated and more specified competition. In 2021, focus on domestic supply chains and rural vitalization will be the priority for the industry.

China dairy market overview source.PNG