Why the Chinese are set to buy less dairy in 2015

Latest data from the US Department of Agriculture (USDA) suggests Chinese dairy imports will remain sluggish in 2015.

In its latest outlook for dairy markets in 2015, it has foretasted for Chinese imports of WMP to decline by 12% as China’s economic GDP growth is expected to slow from a projected rate of 7.4% this year to 6.5% in 2015.

In addition, it also says that an anticipated demographic boom expected from the relaxation of the one-child policy that was to fuel import demand has thus far not materialized.

According to the USDA this suggests that dairy prices will be under pressure during 2015. Farmers, it said, will be facing reduced margins and milk production among major exporters is expected to slow and expand by only 1%.

The speed at which dairy prices recover will depend on drawing down stocks that will have accumulated in exporting and importing countries, it said.

DairyCo, similar to the USDA does say that Chinese demand isn’t growing at the speed that had previously been expected. As a result, it says it is taking longer than predicted to work through the accumulation of stocks which occurred at the beginning of the year.

It also highlights a large proportion of dairy products imported into China are used for infant formula.

It says the relaxation of the one-child policy in 2013 was widely predicted to create a ‘baby boom’ which would have increased demand for imported milk powder.

However like the USDA it says so far, fewer Chinese couples have applied to have a second child than originally expected.

In addition, DairyCo also look at growth in the Chinese economy which it says slowed to a 24 year low in the last quarter of 2014.

While still reporting growth of over 7% year on year, this slowing in the economy may have temporarily dampened demand for dairy products by Chinese consumers, it says.

Long-term things are more positive

DairyCo says predictions for long term demand growth for dairy products in China remain positive, driving up import demand in the medium to long term.

It cites World Bank data which says Chinese self-sufficiency in dairy products is predicted to fall from 86% in 2012 to 76% by 2030.

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