Container tight? More dairy to China in Q1

Overall, European dairy sales to China increased, as did the export of Dutch baby milk powder. Although at the same time the reality is more nuanced. China is the 'main target' for many (European) dairy exporters. The population is growing rapidly. Prosperity is increasing rapidly, thanks to the well-functioning economy that shows impressive growth figures year after year. And last but not least: many Chinese are copying Western habits, including a diet that increasingly contains animal proteins such as dairy.

The figures for dairy consumption have been increasing for years, albeit in fits and starts. In terms of volume, China has now entered the top 5 of major consumers. Measured in terms of consumption per inhabitant, the potential is still enormous.

Higher exports, despite logistical problems
2019 was a good year for European dairy exports to China, partly thanks to the trade war that the country fought with the United States. The forecasts for 2020 promised even more sales. However, the corona outbreak, which emerged in the central province of Hubei at the end of 2019, threw a spanner in the works. The logistics chain was seriously disrupted when port companies, among others, stopped work. Hundreds of thousands of refrigerated containers were left on the side.  

With this knowledge in mind, the Chinese dairy import figures for the first quarter of 2020 are not disappointing, according to figures from research agency IHS. The EU-28 even saw total dairy exports increase by 7,1% to more than 270.000 tonnes, compared to the same period last year. March in particular was a good month when exports were approximately 20% higher. The United States also saw a significant increase in dairy sales to China. In contrast, New Zealand, the largest dairy supplier to Asians, did not benefit. 

Less milk powder
If we zoom in on the figures, it is striking that Europe (particularly Germany) has mainly exported UHT milk. The export of baby milk powder also increased slightly. As the largest exporter, the Netherlands mainly reaps the benefits of this, 'our' exports increased by almost 6% to 25.000 tons. Many consumers still prefer overseas milk powder to Chinese products. Yet the Chinese import figures also cause concern. Imports of major trade flows such as skimmed and whole milk powder dropped. Chinese imports of whey powder increased again, but the US in particular benefited from this now that the trade war has now been settled.  

How should we interpret the Chinese import figures? That's a tough one. Because what will Chinese imports do in the second quarter? Fonterra indicated this week that their sales to China are slowly recovering, but are not yet at their previous level. Does this also apply to European exporters? And although China is an important sales market for European dairy, the majority of production remains within Europe.

Due to the lockdowns in many countries, demand has fallen sharply here. And in addition, dairy exports to the Middle East, which is also an important sales market, are also stagnating in the first months of 2020. In short: The Chinese import figures are not disappointing, but not more than that.