Chinese thirst for dairy imports slowly returns
Chinese demand for dairy products is continuing to grow but not at the breakneck pace of a decade and more ago, Rabobank analyst Sandy Chen says.
Rosy projections for the growth of the Chinese infant formula market have proven to be wide of the mark. Two years ago Euromonitor forecast that with the loosening of the one-child policy, sales of infant formula would jump from US$19 billion to more than US$50B by 2020.
Shanghai-based Chen, in New Zealand last week to provide a first-hand insight into China’s appetite for dairy imports, said people were reluctant to have more than one child because of the perceived high cost of bringing up children.
‘‘Euromonitor was pretty optimistic but they have revised down their projection sizably, it’s still a growing market but not at the same rate - about 8-9 per cent a year, more in line with what we were looking at.’’ Two years ago Fonterra decided to attempt to cash in on the infant formula market by investing $700 million for an 18.8 per cent stake in Chinese company Beingmate. So far no product has been sold as a result of the deal. After criticism over the focus on infant formula, the Chinese government has promoted breast feeding as healthier, and parents have agreed. Chen said after a two-year hiatus, demand for imported dairy products was lifting, partly because Chinese production had fallen, although it was difficult to see transparency in the statistics.
In the early 2000s growth of imported products had been as high as 20 per cent, but today that was down to 4-5 per cent, following the melamine scandal of 2008. Last year domestic milk production fell by 4 per cent and the leading dairy provinces of Inner Mongolia, Hebei and Henan recorded a drop of 3 per cent.
Chen predicted that, with a low level of inventory, China would import more dairy products in the second half of this year.
China has more large scale dairy farms and small farmers are exiting.