Superpower is working on plan B
Is China's role in dairy being overestimated?
China has proven to be an eager consumer of dairy on the world market. It is a position that the country would rather not keep for too long. To achieve this, the country is doing everything it can to support its own sector. However, there too the limits come into view. Time for plan B. Something that could have consequences for the worldwide dairy market.
China was head and shoulders above other players in the global market in 2014 in terms of dairy imports. Although growth is still seen in certain areas, such as cheese, new developments show a different course. The superpower is increasingly trying to fly in milk from its own companies outside China.
Hay costs are getting out of hand
How difficult it is to get milk production up to standard in China has become painfully clear in recent years. For example, the costs of hay imports have spiraled out of control, new dairy farms have demanded higher investments, environmental problems are increasing and Huishan Dairy (one of the largest dairy cow owners in the country) is in financial trouble. The import of roughage can now be absorbed by using more land for this cultivation, but that is at the expense of the cultivation of grain and oilseeds, which the government did not like.
That was a reason for the Chinese government to switch to plan B: vertical integration in the chain, to gain control over sufficient milk for its own population. This means that people buy in other regions and that livestock is also kept there. Then the milk is exported to China. New Zealand and Kenya are especially popular.
Major investments in New Zealand
The Chinese company Shanghai Pengxin Group Co controls Milk New Zealand Limited. It has 29 dairy farms under its care and 30.000 cows. The milk is processed into UHT milk. The Chinese company is also the top investor in Synlait Farms. It owns another 13 dairy farms.
In addition to these developments, Yashili New Zealand and Oceania Dairy are working on the construction of a large milk powder tower in New Zealand. The milk powder is then shipped to China. Between July 2015 and June 2016, 51 percent of liquid milk exports went to China.
Also developments elsewhere
The same developments are underway in Australia and Kenya. As a result, the flow of milk from other countries to China is steadily increasing. It seems that China has found a way to become self-sufficient after all. This also means that China may not always present itself as a major buyer on the world market in the coming years.
A lot of work still needs to be done if China wants to part with the import of dairy products. However, the ambitions that exist mean that it is good for dairy farmers to keep in mind that China will also draw less and less from the supply of dairy on the world market.
Herman van den Pol
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