December 8, 2023
China's dairy market hindered by weak consumption trend and declining population growth
An eFeedLink Exclusive

China's dairy farming industry has transformed tremendously, with small-scale and backyard farms banned following the 2008 Chinese milk scandal.
More than a decade of industrialisation later, the country's dairy cow inventory recovered to 6.3 million head last year.
Meanwhile, data shows that the proportion of large-scale farms with more than 100 heads of cows reached 72% in 2022 (compared with 19.5% in 2008 and 45% in 2014). Additionally, the combined milk production of the top 10 dairy companies in China totalled 9.34 million tonnes, accounting for about one-third of Chinese milk production. Their combined dairy cow inventory totaled 1.85 million heads, covering about 30% of China's Holstein cow population. The top 10s also have an average single farm population of more than 5,400 dairy cows, an 11% increase compared to 2021.
According to the National Bureau of Statistics, China's milk production totalled 39.32 million tonnes in 2022, a year-on-year increase of 6.8%. The total annual production of dairy products reached 40.26 million tonnes, exceeding 40 million tonnes for the first time. However, due to falling demand for dairy products and rising feed prices, the dairy industry's returns were squeezed amid falling milk prices and rising costs in 2022.
Furthermore, a consumption growth rate of 8.5% in 2020 and 2021 ended abruptly. Last year, the consumption of liquid milk dipped for the first time, with a decline of 8.6%, and milk production in excess of 3.4 million tonnes. Data show that the average price of fresh milk in major producing provinces was lower by 3.1% by the end of 2022, compared with the start of the year.
While China's liquid milk consumption decline in 2022 may be attributed to pandemic lockdowns, weak demand appears to be linked to signs that China's economy could undergo deflation.
Also, while the Chinese government abolished its one-child policy, China's birth rate only continues to decline. In the next 10 years, should the Chinese population decrease by 30 million people, this will translate to a dairy consumption drop of 1.5 million tonnes (based on the per capita milk consumption of 50kg), 15% below the current national milk production level.
If China's milk consumption continues to decline in the future — even as major producers expand — a fight for survival will be the main theme of China's dairy farming industry.
- David Lin, eFeedLink