5 Reasons U.S. Dairy Sales to China Will Grow Long-Term

A temporary downturn is causing some to wonder.

Despite a recent slowdown, the long-term outlook for U.S. dairy exports to China remains positive.

In an interview with DairyBusiness Communications, Alan Levitt, USDEC Vice President of Communications, analyzed the dynamics of this important market. 

In 2013, U.S. exports to China were valued at $706 million and in the first three quarters of 2014, sales to China were up 13%. But global dairy imports, including China’s, slowed the latter part of 2014, causing some to wonder if China is souring for U.S. Dairy.

Levitt provided five reasons, among many, for optimism: 

1. Changing Chinese diets are good news for U.S. Dairy. “When a population gets more income, the first thing consumers look at is food—protein, in particular,” says Levitt, who adds that this trend is not new—other markets have experienced this same diet transformation as a result of growth. “Up until recently, most of China has had a vegetable-based diet, but now they want milk and meat. Consumption takes off from there.” That consumption includes fast food and more Western-style diets, including pizza and burgers.
   
   
2. The Chinese are saying cheese. Most Chinese domestic milk production is used to make fresh products, so the country doesn’t have cheese or whey plants. This creates a need for them to import cheese and milk powder that can be reconstituted into other products. China is the world’s seventh-largest cheese importer, and could, according to Levitt, be one of the world’s biggest cheese importers by the end of the decade.
   
   
3. China’s population will continue to rise. Although it’s the world’s most populous nation, home to nearly 1.4 billion people—1/7th of the world’s population—China’s population is still rising. With 16 million babies born each year, the rising population is driving urbanization, GDP growth and, most importantly, consumers’ hunger for dairy products. Since 2004, China’s retail dairy sales have grown 15-20% per year.
   
   
4. U.S. investment in processing plants. USDEC member companies are investing in plants to serve the specific needs of China and other countries. For example, in November, Dairy Farmers of America committed to an initiative with Yili, China’s leading dairy processor, to develop a state-of-the-art dairy ingredients plant in Kansas. Earlier in 2014, DFA began manufacturing shelf-stable milk products specifically geared toward the Chinese market. California Gold-branded ultra-high temperature (UHT) milk is already being sold through U.S. retailers in China. Darigold and Michigan Milk Producers Association have also converted plants to make whole milk powder with the intention of selling it overseas.
   
   
5. The argument for diversification. China produces only about 80% of what it needs and must import the rest, leaving a big opportunity for the United States to export dairy products. Levitt adds that China will be a net importer for the foreseeable future. While New Zealand is the primary dairy exporter to China, depending so much on one country for their dairy products makes the Chinese nervous. “If there’s a drought, milk production crashes, or prices shoot through the roof, then China is beholden to them,” says Levitt. “They need and want to diversify because it makes good sense to do so. They look at the U.S. and see our advantages—a good year-round milk supply, strong food safety record, ample land, and lower production costs than Europe. That puts the U.S. in a good position for exporting to grow.”

Read the entire DairyBusiness article here.

China Image Copyright: 123RF Stock Photo

The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.