China plays a critical role in global dairy markets as the world’s largest importer. In 2023, China’s annual import deficit is estimated at 11.9m metric tons liquid milk equivalent (LME). In the short term, the industry is rebalancing following a period of rapid domestic supply growth (from 30.4m metric tons in 2017 to 39.3m metric tons in 2022), excess inventory as a result of record 2021 import volumes, and softer consumer demand growth. Looking forward to 2032, we can see a range of supply and demand forces (and scenarios) will impact China’s import deficit. The size and growth of this deficit will shape global markets over the coming decade.
The next phase in China’s dairy sector development will focus on productivity and cost-efficiency improvements. Rabobank forecasts a plausible scenario whereby milk supply expands from 41.5m metric tons in 2023 to 47.4m metric tons LME in 2032, with an average compound annual growth rate (CAGR) of 1.5% by volume. At the same time, medium- to long-term per capita demand growth is expected to remain healthy. Rabobank forecasts China’s demand growth to average 2.4% annually between 2023 and 2032, with dairy consumption reaching 62.2m metric tons LME by 2032. As a result, China will continue to have a significant role in the global dairy industry, with a further widening of the import deficit expected. In 2032, imports are forecast to reach 15m metric tons LME.
Alternative scenarios to China’s supply and demand outlook see the annual import deficit range from 8m to 19.2m metric tons in 2032. The most significant swing factors influencing domestic supply will be production costs, the availability of land, water, heifers, and capital, and future government policy. On the demand side, downside risks include weaker income growth, slow economic growth, and sluggish consumer demand.
Source:- Robobank
