China’s Appetite for Dairy in 2019 Supported Global Prices
China’s imports of some dairy products in 2019 hit all-time highs, but the ongoing spread of coronavirus through China could derail the recent recovery in global milk prices. Dairy analysts are concerned that the world’s largest importer of milk powders could throttle back its purchases amid the coronavirus epidemic. Moreover, China’s economy could slow dramatically if factories remain idled, cities remain quarantined, and shops remain shuttered. Indeed, at the recent Global Dairy Trade (GDT) auction, whole milk powder (WMP) values fell 6.2% from the previous auction to a six-month low, while skim milk powder (SMP) dropped 4.2%.
For now, though, China remains a big buyer of dairy products in world markets, says Sara Dorland, analyst with the Daily Dairy Report and managing partner of Ceres Risk Management, in Seattle. “China’s dairy imports, which did not disappoint in 2019, are likely the driver behind the dairy market recovery that started last fall,” Dorland notes. “Last year, was one of the strongest years on record for Chinese dairy purchases, with several categories ending at record highs or near top performance.”
China is the world’s largest importer of WMP, and New Zealand is the world’s largest exporter. Last year, China purchased more than 664,000 metric tons (MT) of WMP, according to GTIS data. “That was 29% more than in 2018 and second only to the country’s record-setting imports of WMP in 2014,” Dorland notes. “China imported 34% more WMP in 2019 than it did in 2018, and more than 90% of China’s total WMP imports came from New Zealand.”
China’s SMP imports also hit record-high levels in 2019, and more of that product is starting to come from the United States. Last year’s SMP imports of 343,656 MT were 23% higher than 2018’s. “China imported considerably more SMP from the United States in December, with 3,924 metric tons coming from the United States compared to just 278 metric tons the year before,” Dorland says. “That was not only a return to pre-trade-war levels, but it also surpassed those levels by a considerable amount. The news of better-than-expected Chinese imports of U.S. SMP could bode well for this year.”
China’s cheese imports of nearly 115,000 MT were up 6% compared to the previous year, setting an all-time, and infant formula imports bettered 2018 levels by 7.2%. “But the pace of Chinese cheese imports in December slowed 5.5% compared to 2018,” Dorland says. “December imports of infant formula also slowed considerably, with volumes falling 17.5% below the pace set in 2018.”
In contrast, China’s imports of whey powder continued to improve in December to 43,505 MT but were still 1.7% below December 2018. December’s drop in whey imports was the lowest year-over-year decline for any month in 2019, and China increased imports of U.S. whey by 33% compared to 2018, Dorland notes. “It appears that after a year, China has been able to contain African swine fever, and imports could begin to expand later this year as the hog herd slowly recovers,” she adds.
Both the phase-one trade deal and the coronavirus epidemic could impact China’s imports of dairy products in 2020, says Dorland. While the coronavirus could slow overall purchases from the world’s most populous country, the phase-one trade deal would benefit U.S. dairy, she says.