Three Takeaways from China: Still the Land of Milk and Honey?

China’s dairy industry is estimated to have exceeded RMB 500 billion, or nearly $70 billion in 2023, according to the China Business Industry Research Institute.

Despite steadily rising dairy demand, sales and consumption, the global oversupply of milk production seems to have had a major impact on the world’s second-largest economy. Will the bearish sentiment last longer than expected? What’s next for China and its dairy market?

StoneX Dairy Analyst Lu Shi shares her insights from the 2024 China Dairy Industrial Annual Conference in Changsha.

Domestic milk is facing low-price competition

Reports say an oversupply of milk in 2022 amounted to 3 million tonnes of fresh milk, roughly 7% of production. This is a result of both milk production growth and logistic restrictions. Despite a recovery in consumption post-Covid in China, there is still a strong preference for imported milk over domestically produced milk.

Domestic milk is 1,200 Euros per tonne cheaper than imported milk, but people prefer imported milk powder, citing taste or quality concerns.

“There is a mountain pile of domestic milk powder,” Lu says, adding that there are a lot of loyal milk users for imported powder.

Milk production in China is still growing at 5% YoY in Q1 2024, according to surveys, with forecasts for an oversupply for the year expected to worsen.

Bigger dairy farms are still expanding

While smaller farms with less than a herd of 3,000 are on the decline, larger dairy farms are still in expansion mode.

Leading dairy companies have seen more capital support going through market challenges, but smaller-size farms are expected to exit the business after this production season, Lu shares, pointing to the end of Q3 as worth watching for a clearer outlook for next year.

Compared to herd structures in dairy farms in Ireland, those in China need to maintain a higher heifer number to keep a stable herd size. This is notable given the share of heifer per herd size in the U.S. has been on a downward trend, due to higher beef prices among other factors.

As Chinese dairy farms are still expanding, the industry is also evolving and learning management techniques, with listed companies and their herd structure seemingly “less terrifying,” according to Lu.

Tea and coffee markets are the few bright spots for Chinese dairy demand

Retail dairy consumption continues to play a crucial role in China’s dairy market. Bakeries, restaurants and cafes take a bigger part of dairy consumption in comparison to Europe, which holds a more mature and long-time dairy consumption tradition.

Sales in retail dairy are seeing drops in multiple categories – liquid milk, ambient yogurt, and infant formula to name a few. Whole milk powder and skim milk powder are experiencing an even larger impact as the previously listed products are destinations for these powders. Eastern China is the exception to this, where it has not seen long-lasting headwinds just yet.

Recreational categories, such as non-dairy creamer, destined for milk tea and bubble tea, are still seeing elevated levels of demand, Lu shares. Chinese coffee shops such as Luckin Coffee are very much expanding their footprint – with milk-added lattes being one of the most popular drinks consumed in cafes across China.

Additional macroeconomic headwinds remain for China, including those that face its property market, and real estate-adjacent industries will continue to face a challenging road ahead.

Interested in hearing more insights? Listen to the full episode of Dairy Insights: Heard Mentality with Lu on Spotify here.

Make Actionable Dairy Insight Your Edge

Sign up for your 14-day StoneX Plus trial: 


See why StoneX is a partner of choice

Have questions about our products or services? We're ready to help.
See why StoneX is a partner of choice

StoneX: We open markets

Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.

  • Partnership icon


    With access to 36+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bi-lateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.

  • PC Monitor Blue


    From our proprietary Market Intelligence platform, to “boots on the ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.

  • Price tag


    As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve; our financials and record of accomplishment are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.


By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our  Privacy notice  to learn more.

If you're an existing customer, please direct any inquiries to your StoneX sales team.