Global import demand for dairy products has been stronger than expected in Q4 2023 through February 2024 (the most current data as of writing), with global imports, excluding China, surging to new record highs on a 12-month rolling basis. This strength has primarily been driven by the Middle East and parts of Southeast Asia, which bounced back from weak imports for most of 2023.
EU27 + UK milk equivalent exports in February exceeded forecasts, up 1.6% from last year (not adjusted for leap year), but shipments to China declined by 31% compared to last year.
This pullback could be due to increased domestic milk production in China and relatively weak consumer demand. USDA data shows that Chinese milk production reached 41 million tonnes in 2023 (+4.6% from 2022), a 28% increase compared to 2019, a trend that could have significant implications for global dairy demand and prices.
However, a special report for Hoard's Dairyman magazine revealed a healthy skepticism of Chinese production data, as detailed by Nate Donnay, StoneX Director of Dairy Market Insights. The reason is that the data doesn’t fully capture all the milk in the country and can be prone to swings and anomalies.
There is, however, broad agreement across the dairy industry that China is significantly increasing its domestic dairy production capacities. Naturally, the government has been encouraging more production and consumption of domestically produced milk to reduce reliance on imported liquids and powders.
One final consideration for the Chinese pivot to domestic production could be the tightening of environmental restrictions by the European Union and New Zealand, both major global dairy-producing regions, that are expected to limit milk production and exports. The EU and New Zealand are signaling that the period of abundant and growing milk supplies has ended.
China appears to have read the memo.
This article is based on research produced by Nate Donnay, StoneX Director of Dairy Market Insights
To read the Hoard’s Dairyman article, click here.
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