November 24, 2006

 

China dairy policies to favour cow genetics: USDA

 

 

China's milk production continues to grow rapidly in response to domestic demand, but the pace of increase is forecast to continue slowly in 2007 because of fluid milk production constraints and rising domestic production costs, says the US Department of Agriculture's November 21 report.

 

China's long-term dairy policies to increase yields and quality will favour genetic improvements over expanding cow numbers.  The sector will thus be the recipient of considerable domestic and overseas investment. 

 

The lagging dairy cow numbers and milk production levels will result in strong demand for US bovine genetic materials and dairy products to China in 2007. 

 

The USDA Foreign Agricultural Service (FAS) Beijing adjusted China's 2006 total milk production 2 percent down to 34 million tonnes and cow milk production 3 percent down to 32.8 million tonnes from the previous estimation due to the slower pace of heifer size increase due to production constraints.

 

China's cow milk production accounts for 96 percent of the country's total milk production. The production has mostly risen due to expansion in cow numbers rather than average yield increases, reports the USDA.

 

Although production costs have gone up considerably for dairy farmers, processing plants have not raised commensurately their milk purchase prices because of efforts to maintain their market share.  As a result, their profits have fallen.  In turn, China has started shifting efforts from fast expansion in cow numbers to yield increases through genetic improvements, says the USDA report.  This focus on improving dairy genetics will provide an opportunity for US companies to export bovine genetic materials. 

 

Chinese experts are even predicting that China will become the world's third-largest dairy producer by 2020.

 

The 11th Five-Year-Plan will slow the pace of China's increase in both dairy cow numbers and cow milk production.  In the long run, the slow pace of increase in cow herd size will be offset by yield increases.

 

Limited land, water, feed and energy resources remain considerable challenges to China's dairy sector and more recently the FMD outbreaks pose a greater challenge.

 

The report forecasts China's raw cow milk production in 2007 to increase 16 percent to 38.1 million tonnes, non-fat dry milk (NFDM) production to remain at 55,000 tonnes, and whole fat dry milk (WFDM) production to increase 12 percent to 1.2 million tonnes. 

 

Domestic NFDM and WFDM productions lag demand, which will most likely drive large imports in 2007.

 

China's fluid milk imports are almost nil due to cost, transportation and storage limitations.  The USDA forecasts China's NFDM imports in 2007 to increase 23 percent to 80,000 tonnes and WFDM imports in 2007 to increase 18 percent to 100,000 tonnes.

 

The US, according to the agency report has been the largest whey supplier to China's market, accounting for 38 percent from January to September 2006.  Although China's whey demand is strong due to limited domestic production, global supply capacity normally impacts China's imports.

 

China mainly exports two kinds of dairy products, fluid milk and WFDM.  The USDA report forecasts China's fluid milk exports to increase 8 percent to 40,000 tonnes and WFDM exports to increase 6 percent to 36,000 tonnes due to the demand increase in the traditional markets in East and Southeast Asia.

 

China's fluid milk exports to Hong Kong and Macau account for 96 percent of China's total fluid milk exports and WFDM exports to Taiwan, Hong Kong and Myanmar account for 75 percent of China's total WFDM exports.

 

 

For the full USDA report, click here