China trade
May 28, 2020

China’s Dairy Demand Holds Up

 |  By: Fran Howard

The world’s most populous country continues to be voracious buyer of milk powders despite the ongoing pandemic and an economy that has slowed sharply. With April’s purchases, China has imported almost as much whole milk powder (WMP) in the first four months of this year as it did during the January through April period last year, notes Sarina Sharp, analyst with the Daily Dairy Report.

In April, China imported 140.4 million pounds of WMP, up 21.9% from a year ago, according to Trade Data Monitor. “Relative to the formidable buying pace the country set in 2019, China’s WMP imports got off to a slow start this year, but April's strong tally brings them to within 0.2% of last year, after adjusting for leap day,” Sharp says. 

The buying pace comes despite a steep drop in economic activity. In January, prior to China’s lockdown, the country’s economy was expected to grow 6% in 2020, down slightly from 2019’s 6.1% growth. According to the International Monetary Fund (IMF) April World Economic Outlook, Covid-19 has changed the outlook dramatically. IMF now expects China’s economy to grow by only 1.2%, a 4.8 percentage point decline from its January outlook. 

While millions of workers have been laid off in China and others have seen pay cuts, pent-up demand for goods and services will shift into 2021 as the labor market recovers. IMF expects China’s economy to post 9.2% growth next year, up 3.2 percentage points from its January 2020 outlook.

China’s imports of skim milk powder in April fell 4.1 percent to 55.1 million pounds, compared to last year. But last year, China was on a furious milk powder buying spree, purchasing large volumes from New Zealand as well as inexpensive Intervention stocks from Europe. Sharp notes that while China's January through April imports of SMP lagged 2019 volumes by 14.3%, they were still higher for the same period in every previous year. 

“Given disruptions in global trade and reports of more milk moving to driers in China during the lockdown, the country’s milk powder imports were stronger than anticipated,” Sharp says. “That's welcome news in a world with a growing milk powder surplus.”

China has also been importing more whey, but whey imports are still well below 2018’s record-high levels. “Strong whey imports reflect a gradual improvement in China’s efforts to rebuild its hog herd and modernize its swine industry,” Sharp states. “The shift to a more modern industry favors whey consumption because many large-scale livestock growers include whey in piglet rations, while backyard farms typically do not.”

However, Sharp notes that China’s pig herd is still only “a shadow of what it was before it was devastated by African swine fever,” and a much smaller pig herd will likely continue to cap whey demand for the foreseeable future.