Is China a potential market for U.S. dairy products?

"A glass of milk means health for citizens and wealth for farmers."

In May 2013, I assisted with a study aboard program in China hosted by the Ohio State College of Food, Agricultural, and Environmental Sciences on the issue of Food Production, Safety, and Security.

It was a four-week program held on the Beijing campus of the Chinese Academy of Agricultural Sciences, but I was present for only one week to focus on the dairy industry. The other three weeks included the topics of international trade, rice production, and food processing.

There were 22 students who participated and only one of the students was a major in animal sciences.

In addition to classroom lectures and tours of a dairy farm and a dairy processing plant, cultural exposures included eating Pekin duck, visiting the Great Wall, and visiting the Olympic Center.

Lots of cows

China provides a unique opportunity for studying the dairy industry. It has about 4.5 times the population of the U.S., but only 1.1 (China) versus 3.4 (U.S.) agricultural acre/person for food production.

There are about 10.6 million dairy cattle in China versus 9.1 million in the U.S.; however, the milk production per cow is much higher in the U.S.

Just like with most countries, there are some dairy herds in China with very high milk yield and that use very modern technology. The dairy farm we visited had about 10,000 cows, with the plans to grow to 14,000 cows. It manufactured its own brand of yogurt.

Communal parlors

Yet, many of the dairy herds in China are small, sometimes having to take the cows to a community parlor or actually housing them in a cooperative facility (motels) with adjacent living quarters for the owners provided by the government and a community parlor available for the cooperative.

With these systems, a common feeding center also is often used. Low forage quality and an affordable feed supply are major limiting factors for increased milk yield.

Demand and consumption

The consumption of dairy products by the Chinese people has historically been quite low. Some of this was caused, and continues to be a factor, by the lack of refrigeration in the rural areas.

At present, the per capita consumption of dairy products is about 220, 500, and 620 pounds in milk equivalents for Asia, North America, and Europe, respectively. Yet, stable-to-slight growth in dairy product consumption in Europe and North American is expected over the next eight years, but major increases in dairy production consumption is expected in Asian countries.

Consumption of dairy products in China has been among the lowest for the Asian countries.

The major increases in consumption of dairy products are ultra high temperature (UHT) pasteurized milk that is stable at room temperature until opened, original and greek yogurt, and ice cream.

The Chinese people have not readily acquired the taste for cheese, but pizza has certainly increased in popularity in recent years. So, the taste for cheese will likely be greater in the next generation.

In addition, the rise is family income and the government’s encouragement of 300 to 500 grams of dairy products per day by children will help drive upward the demand for dairy products.

Export market?

With these positive signals for increased consumption of dairy products, the U.S. continues to look at China as a growing market potential.

However, marketing stress for dairy products continues to arise. In 2008, the scandal of melamine adulteration of milk was blamed for the death of six infants and the sickening of many others. This caused severe distrust in the Chinese dairy industry.

Although the Chinese government took various measures to remove the risk for further melamine contamination of the milk supply, issues continued to surface three to four years after the initial occurrence in 2008.

With this distrust, a couple of Chinese companies built dairy processing plants in New Zealand in 2012 because the Chinese people view New Zealand milk as being safe.

Now in recent months, the confidence in the New Zealand markets has weakened because of the botulism-contaminated dairy products from a New Zealand-based Fonterra plant and the dairy value added product of lactoferrin from milk processed by New Zealand’s Westland Milk Products was found with high levels of nitrates.

Therefore, a lot of positioning by industry and governmental groups is occurring to try to protect the Chinese food supply and to build confidence in the safety and quality of their food.

Although the production of milk in Chinese is increasing, the demand for milk will likely continue to outpace the rise in milk production in China, and China will continue to be a sought-after market for exportation of dairy products, even by the United States.

So, the U.S. dairy industry will continue to try to get milk produced in the U.S. into China. But will the U.S. milk continue to be processed by U.S. companies before it enters China? Consider the announcement just about two months ago that a Chinese firm was purchasing Smithfield.

The flow of milk along the processing and marketing channels may experience some changes, but the safety and wholesome of the products are of paramount importance for providing the nutrition to consumers and assuring future market success.

 While in China earlier this summer (L-R), Kaleigh O’Hara, Katie Bauer, Dr. Maurice Eastridge, and Derrick Freshcorn expressed some Buckeye spirit atop the Great Wall.

While in China earlier this summer (L-R), Kaleigh O’Hara, Katie Bauer, Dr. Maurice Eastridge, and Derrick Freshcorn expressed some Buckeye spirit atop the Great Wall.


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