China’s uncertain demand for dairy imports

Published 18 September 19

During the first half of 2019, China’s dairy imports increased by 26% year on year. The reasons for this are unclear however, leading to some uncertainty over how import demand may develop in the second half of the year. 

One theory behind the growth in imports is that it was in response to a low stock position, due to lower than normal growth in imports in the latter half of 2018.  Alternatively, it could be that buyers have been building stocks in anticipation of higher demand in the second half of 2019.

China dairy imports graph

There has been a strong link in recent years between China’s demand for dairy imports and their GDP per capita. Overall growth in China’s GDP has slowed to 6.2% in Q2 2019, this is China’s slowest growth rate in 29 years, and may lead to lower consumer demand for dairy products. This, combined with the higher stocks of dairy products could to lead to reduced growth in dairy imports for China during Q3 2019.

Another factor which may limit import demand over the remainder of the year is the increased availability of domestic milk. Milk production in China has been above previous year levels since the beginning of the year. However, the US trade war may slow production growth. This is due to China’s reliance on imported soya and alfalfa from the US to use as a dairy feed and the imposition of import tariffs on these products, increasing production costs.

Despite this, growing Chinese demand for dairy will continue to surpass its production capacity, and the country will still rely on imports to meet consumer demand.  However, it is unclear whether the current stock levels will be sufficient to meet demand, or if import volumes will need to increase over the second half of the year.

 Charlie Reeve