January 14, 2019

U.S. Missing Out on Chinese Dairy Import Growth

Top Story  |   |  By: Mike Opperman

Just because the U.S. and China are in the depths of a trade war doesn’t mean that the Chinese are halting all imports of dairy products in the country.

On the contrary, year-to-date milk equivalent imports are up 9% while imports in November were up 13.2%, according to data from INTL FCStone. That’s higher than November 2013, which is considered a record high.

Unfortunately the U.S. isn’t reaping the benefits of Chinese import growth. As the table shows, the U.S. share of the Chinese dairy import market has dwindled considerably since 2016. Data also shows that as the U.S. share has fallen off, other countries have filled the void.

China market share

A group of interesting new players—Belarus, Ukraine and Uruguay—have taken market share over the past six months, according to Nate Donnay, director of dairy market insight at INTL FCStone.  

While Belarus and Ukraine send most of their exports to Russia, a surge in the Russian dairy industry (estimated up 4.1% year to date, Donnay says) has dropped Russian imports by 20%. “That has freed up available supply in Belarus and Ukraine and they have apparently found China to be a ready buyer,” Donnay says. 
The drop off in Russian imports explains only a part of the 844,000 MT increase in exports from Belarus and Ukraine into China, according to Donnay. 

“What’s also interesting is that exports started to surge (at least from Belarus) in June, which is when the retaliatory tariffs on the U.S. started,” Donnay says. 

If and when China drops the tariffs, it might be hard for the U.S. to regain lost share. 

“Belarus has consistently been growing market share in recent years, so it might take more than the removal of the tariffs to shift that business back to the U.S.,” Donnay says. 

Even if Russia imports more dairy products in 2019, he says, there could still be a good amount of dairy products move from Belarus/Ukraine into China.