China Targets EU Dairy Just as Its Own Milk Industry Flounders

Overproduction and slowing economy push prices into tailspin
Exports have surged as domestic farmers struggle with surplus

China’s anti-subsidy probe of dairy imports from the European Union comes at a time when the local industry is on its knees.

Limiting shipments from the EU could relieve some pressure on farmers, but the quantities targeted are small and domestic conditions have been worsening for quite a while. The market is grappling with excess production capacity built up over years, and a slump in demand due to the slowing economy that’s having an outsized impact on pricier foods.

China’s dairy sector is facing the most severe challenge since 2008, Gao Fei, chief executive officer of China Mengniu Dairy Co., said in July, according to a report in local media. That was the year when milk contaminated with melamine led to the deaths of several babies, sickened hundreds of thousands and destroyed the industry’s reputation.

China is Producing More of Its Own Milk

The jump comes as Beijing pushes to cut dependence on foreign imports

Source: National Bureau of Statistics

Dairy isn’t central to the typical Chinese diet. Milk only became a kitchen staple this century and many still consider cheese a Western luxury. Developing the taste for dairy in a country of more than a billion people represents a rare opportunity for growth that firms, both foreign and domestic, have been keen to seize.

But that’s come to a juddering halt. Milk prices have dropped continuously for more than two years, according to the farm ministry. Some 80% of farmers are now loss-making, by one estimate, and producers are culling more cows than usual. The industry is also looking at new avenues of demand, like churning more milk into cheese, as well as scouring export markets for buyers to soak up the domestic glut.

Look also

Ag Secretary Tom Vilsack discusses the Dairy Business Innovation Initiatives grant program at World Dairy Expo.

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