November 3, 2006

 

China dairy market to boom, New Zealand set to cash in

 

 

China's dairy market has soared to 25 million tonnes a year with New Zealand being the major supplier of imported product, said an agricultural banker.

 

In spite of the growing domestic milk production, China has been able to produce just 24 million tonnes (liquid milk equivalents) of dairy products per year. Demand for dairy products more than doubled in the past five years, reported Rabobank.

 

New Zealand, a major import source accounted for US$460 million imports last year. Other import nations included Australia, US and France, which together with New Zealand provided 80 percent of the imports.

 

However, the consumption of 25 million tonnes in 2004-2005 was still only the equivalent of less than 20 kg of liquid milk equivalent per person.

 

The annual consumption of dairy products would reach 30 kg a person by 2015, according to a separate statistics.

 

Therefore, New Zeeland holds a bright future from the Chinese market, said Rabobank.

 

Besides, reducing tariff on its dairy products, China has also been negotiating for free trade agreement with New Zealand and Australia.

 

Dairy industry sales were worth US$11 billion in 2005, reflecting a compound annual growth rate of 30 percent since 2001.

 

The rapid growth has been driven by growing affluence in the middle class of more than 200 million consumers, rising nutrition awareness, fast expanding retail chains and dairy industry investment in brands and promotion.

 

Government controls in a bid to protect grassland drove dairy production from a pasture-based system to cows being housed and fed on crop straw, silage and manufactured feed. The average annual production was still 2,000 kg milk per cow.

 

However, eventually China would account for 10 percent of its global dairy market, predicted New Zealand based Fonterra Rabobank also predicted another 8 to 10 years of strong growth in the Chinese dairy market.