13 March 2013

2 minute read

Asia

Despite a milk production increase of 6 per cent last year, supplies remain tight. Growth rates are slightly below that of 2011. 

Domestic output reached just under 23 million tonnes for the 11 month period to November and comprised of:

• Drinking Milk, 19 million tonnes – up 6 per cent
• Solid Dairy Products, 3.5 million tonnes - up 9 per cent

The domestic processing sector found their margins squeezed as average milk prices and labour costs increased. At USD 0.6/kg China’s milk prices rank 4th highest in the world after Japan, South Korea and Norway. Despite tighter margins, Yili and Mengniu both performed well with significant increases in their profits driven by higher retail prices particularly within their infant formula business.

According to Chinese customs, imports of milk powders increased at its highest rate in 2012. WMP imports reached over 405,000 tonnes while SMP volumes reached 167,000 tonnes, both up by over 20 per cent on the previous year. Infant formula amounted to some 91,000 tonnes, up 16 per cent.

Whey powder (and permeate) imports volumes amounted to over 378,000 tonnes, an increase of 10 per cent but below the increase experienced in 2011 (30 per cent). This is a reflection of a weaker pig industry rather than any slowdown in the requirements by the dairy sector.

The outlook for this year remains positive with retail prices across the dairy sector expected to increase further. While a further increase in domestic production is anticipated, it will fall well short of market requirements resulting in increased dairy imports in 2013.

While improvements in food safety & controls within the supply chain are a priority at industry and Government level, consumer confidence in domestic product still remains low.