According to Rabobank, this year will see a further increase in Chinese dairy purchases on world markets. However, analysts suggest a strong production season in both the Northern and Southern Hemisphere should generate enough exportable supply to exceed additional needs in the first quarter of 2014.

This is according to Alan O’Brien, in the Shanghai Office of Bord Bia.

“Last year witnessed the start of a large and ongoing shake up of China’s dairy industry at farm level, with domestic production in a state of transition as government and industry attempt to phase out China’s small scale or “backyard” farming units ( less than 100 cows) and increase scale of production,” he noted.

According to O’Brien, this process will continue to limit domestic supply in the interim period, three years plus, as many farmers leave the industry and others consolidate and invest in economies of scale.

“These structural changes have had a key impact on domestic supply and caused prices charged by China’s major dairy companies to increase at retail level in a bid to manage this shortage. On international markets, the impact of increased Chinese demand was keenly felt, with China squeezing out most if not all the increase in dairy exports from surplus regions in quarter four, increasing China’s overall dairy imports by 17 per cent in the final quarter.”

In terms of the outlook for 2014, he said the increasing demand at consumer level for dairy products in China is expected to increase China’s overall purchase of dairy products by as much as 15 per cent to 20 per cent in the first half of 2014, or by one billion litres in liquid milk equivalent.