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China is drowning in milk. It's all because of children, or rather the lack of them

Chiny toną w mleku. Wszystko przez dzieci, a w zasadzie ich brak

China is struggling with overproduction of milk, a result of two factors: falling birth rates and consumers holding on to their wallets more tightly.

China’s milk surplus illustrates the unintended consequences of Beijing’s efforts to boost food security in the dairy sector, Reuters reported. But a weakened economy and the higher price of dairy products like cheese, cream and butter have made consumers wary of them. Milk consumption in China fell from 14.4 kilograms per capita in 2021 to 12.4 kilograms in 2022, the latest year for which data is available from the China Bureau of Statistics. Meanwhile, milk production in China, the world’s third-largest producer, rose to nearly 42 million tonnes last year from 30.39 million tonnes in 2017, exceeding Beijing’s 2025 target of 41 million tonnes.

High costs and the legacy of a 2008 milk adulteration scandal that left at least six children dead and thousands hospitalized are limiting China's export opportunities.

Chinese milk prices have fallen below the average cost of production of about 3.8 yuan ($0.5352) per kg since 2022, causing many loss-making farms to close and others to reduce their herds, selling cattle for beef – another oversupply in the market.

As a result, the Middle Kingdom is currently drowning in unwanted milk.

Chinese Dairy Imports

China’s dairy imports, mostly from New Zealand, the Netherlands and Germany, fell 13% year-on-year to 1.75 million tonnes in the first eight months of the year. Meanwhile, milk powder fell 21% to 620,000 tonnes, according to Chinese customs data. Net dairy imports in 2024 are likely to fall 12% from a year earlier, and “the prolonged downturn in the dairy industry could continue to weigh on import volumes in 2025,” Rabobank Research said.

Is China's dairy boom over?

China’s dairy industry boomed after Beijing called in 2018 for more farms and higher milk production, part of a broader plan to become more self-sufficient in food. The number of farms has increased as a result, as has imports of Holstein cattle. Now, smaller farms are on the brink of bankruptcy. China’s economy has slowed, and the birth rate is falling, meaning fewer babies need formula. China’s birth rate in 2023 was a record low at 6.39 per 1,000 people, down from 12.43 in 2017, according to government data.

Source: Reuters

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