Report Highlights:

Taiwan milk consumption continues to grow from a small base, and Taiwan milk production continues to expand slowly. Operating in one Taiwan’s few profitable agriculture sectors, local dairy farmers increased milk production from 323 TMT in 2006 to an estimated 340 TMT in 2007. Growth is expected to decelerate slightly in 2008, but demand is expected to continue to expand. While the U.S. is not competitive in the export of most dairy products to Taiwan, we have been gaining market share in select high value items like cheese and whey.

Executive Summary

Taiwan milk consumption continues to grow from a small base, and Taiwan milk production continues to expand slowly. Operating in one Taiwan’s few profitable agriculture sectors, local dairy farmers increased milk production from 323 TMT in 2006 to an estimated 340 TMT in 2007. Growth is expected to decelerate slightly in 2008, but demand is expected to continue to expand. While the U.S. is not competitive in the export of most dairy products to Taiwan, we have been gaining market share in select high value items like cheese and whey.

Data included in this report is not official USDA data. Official USDA data is available at http://www.fas.usda.gov/psd

Production

In 2006, a total of 323,165 mt of cow milk was produced, from 636 registered dairy farms. Production is estimated at 340,000 mt in 2007 and is projected to increase slightly in 2008. Taiwan’s goat milk production totaled 18,581 mt in 2006. Production is expected to continue to decline in 2007 and 2008.

Encouraged by world dairy price hike, Taiwan farmers may want to expand their herd sizes. In reality, it is difficult for farmers to increase production rapidly because they are dependent on imports for almost all inputs, seedstock, feed, etc.

Dairy farming has been one of the few profitable industries in Taiwan’s agricultural sector. According to the Council of Agriculture, a dairy cow created NT$43,792 (US$1,350 equivalent) of profit in 2006. Over half of the production cost was spent on feed (NT$56,199 out of a total of NT$100,292). Milk production was 6,644 kg per cow in 2006.

Taiwan’s dairy farmers also need to combat the global price hike on feed like their counterparts elsewhere. With the agricultural authority’s intervention, the purchase prices for raw milk, paid by processing plants to farmers, were increased by NT$3/kg in July 2007 in response to farmers’ outcry over increased production cost resulted from skyrocketing global feed price hike. The new prices are: NT$18.24/kg for winter season (December to March); NT$25.73/kg for the summer season (June to September); and NT$23.73/kg for the warm season (April, May, October and November). (Prices vary slightly with the fat contents. Current exchange rate is approximately NT$32.4=US$1.)

To reflect the price increase on raw milk, retail milk prices were raised accordingly. In September 2007, the three leading processing plants, whose production accounts for over 70 percent of fresh milk on Taiwan, were fined for NT$10 million by the Fair Trade Commission for “inappropriate price hike” not for concerted action on price raise. The fine was not able to stop the overall price increase of fresh milk in retail.

The tropical and sub-tropical climate is not the best environment for dairy production. Taiwan produces no other dairy products (cheese, whey, etc.) in commercial quantities.

Consumption

The Taiwan populace did not traditionally drink milk and are not regular dairy product consumers. However, with increased income and knowledge of the nutritional value of milk, consumers are gradually incorperating dairy products, mainly fresh milk into their diets. The relatively expensive local fresh milk is virtually all for the consumer-ready fresh consumption, including some limited flavored milk and yogurt drink. The only processed dairy product has been small amount of milk powder produced by one processing plant out of surplus milk during the winter. Annual production of milk powder is estimated at 1,000 mt (out of 8,000 mt of raw milk) during the winter time. Demand of other dairy products is met by imports.

There are 19 dairy processing plants on Taiwan, with only three in significant size and process over 70 percent of total raw milk into consumer-ready fresh milk.

Council of Agriculture reported a 15.36 kg per capita consumption of fresh milk; 3.96 kg of milk powder; 1.64 kg of other milk (yogurt drink, etc.) as well as 0.68 kg of butter in 2006. Dairy consumption, especially processed products, is still far behind that of advanced countries.

Milk output tends to be highest during the cooler winter months (October through March) while consumption patterns for fresh milk run in reverse. Consumption peaks in the hot summer but shrinks in the cooler winter.

Driven by a combination of climate changes, trade policies and competition for cattle feed from biofuel producers, global milk prices have doubled over the last two years. First time in history, production cost of reconstituted milk from milk powder reached the same level as locally produced fresh milk in 2007. Consumer concerns about reconstituted milk being labeled as fresh milk no longer exist in 2007.

Fluid milk is supplied virtually all locally. Retailers have been successful in creating fluid milk sub-segments by introducing health-focused additives. More diversified milk drink products are expected in the Taiwan market.

Further Reading

- You can view the full report, including tables, by clicking here.

List of Articles in this series

To view our complete list of 2007 Dairy and Products Annual reports, please click here

November 2007