Rabobank dairy report: Potential impacts of China’s probe into EU dairy subsidies.
In response to the European Union’s decision to hike tariffs on Chinese electric vehicles, China has initiated a probe into the dairy subsidies provided by the EU and several of its member states. This investigation, focusing on the EU’s Common Agricultural Policy and national plans of eight countries, could reshape the global dairy trade landscape. Increased trade tensions could benefit dairy exporters from Australia, New Zealand, the UK, and the US, while posing challenges for European exporters. A recent report by RaboResearch anticipates that the market impact might not be felt until 2026 – if even then.
Increased tariffs on Chinese electric vehicles triggered this probe
The EU’s recent announcement that it will increase tariffs on Chinese electric vehicles has led to a counterreaction. With the EU tariffs set to rise significantly, China’s Ministry of Commerce has launched an investigation into EU dairy subsidies that could have far-reaching consequences for European exports. The targeted products, including liquid cream and various cheeses, represent a significant trade value of USD 572.5 million as of 2023.
The scope of the investigation is limited but could expand
While the current probe does not encompass the highest-volume categories such as whey-derived products and milk powders, there is concern within the industry that China may broaden its investigation. The probe, expected to run through most of 2025, leaves the door open for potential market impacts by 2026. France, as a major exporter, could be significantly affected, given its 37% share in the targeted product exports. Meanwhile, some dairy industry participants are concerned that China could expand the scope of investigation-targeted products.
Non-EU countries to potentially benefit from trade shifts
“As the investigation unfolds, non-EU dairy exporters like Australia, New Zealand, the UK, and the US are poised to capitalize on any resulting trade shifts,” explains Mary Keough Ledman, Global Strategist – Dairy for RaboResearch. “With China still heavily reliant on imports for over half of its needs in the targeted categories, these countries could see an increase in market share should additional tariffs come into play.”
China’s dairy industry is at a crossroads
China’s domestic dairy industry is currently experiencing overproduction relative to demand. This has prompted a strategic shift toward value-added dairy products to better utilize the surplus and potentially reduce reliance on imports. The ongoing trade tensions with the EU may inadvertently accelerate this transition, offering a silver lining for local Chinese dairy producers and exporters from other nations.
About Rabobank
Rabobank Group is a global financial services leader providing wholesale and retail banking, leasing, and real estate services in more than 38 countries worldwide. Founded over a century ago, Rabobank today is one of the world’s largest banks with over $660 billion in assets.
In the Americas, Rabobank Wholesale Banking North America is a premier corporate and investment bank to the food, agribusiness, commodities and energy industries. Rabo AgriFinance, a subsidiary of Rabobank, is a leading financial services provider for farmers, ranchers and agribusinesses in the United States. Together, we provide sector expertise, strategic counsel and tailored financial solutions to clients across the entire value chain. Visit www.RabobankWholesaleBankingNA.com and www.RaboAg.com.
About RaboResearch Food & Agribusiness
RaboResearch Food & Agribusiness has about 80 analysts working in local teams across the worldwide Rabobank network. They generate knowledge, and develop views and insights on businesses, topics and developments in the food & agribusiness sectors across the globe. All analysts have their own sector specializations—ranging from meat and fish to dairy, vegetables, fruit and floriculture, coffee and cocoa.
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