21 Aug 2014

Doubts for China's dairy farm growth

10:33 am on 21 August 2014

The author of a new report on the dairy trade in China doubts whether it will ever become self-sufficient in milk.

Milk separator equipment at a dairy factory.

China's switch from backyard dairy operations to corporate farms may not be enough to meet demand. Photo: PHOTO NZ

Susan Kilsby, a senior dairy analyst with Agrifax, produced the report after a research trip to China, which is New Zealand's biggest market for milk powder.

She said China's demand for imported dairy products would continue to grow because its own milk production would not be able to keep up with consumer demand.

The report predicted that, by 2020, China would need to import the equivalent of 20 billion litres of milk to compensate for the shortage in its own supply. That would be 75 percent more than it imported last year.

And despite the drive to increase its milk production by replacing backyard dairy farms with giant corporate-style farms, Ms Kilsby said it was not going to get there.

"I mean they're moving to these big farms and they're slowly getting better yields, but it takes a long, long time to get those farms producing large quantities of milk. You've got to look at the cost of producing milk in China. They just don't have the natural resources," she said.

"They've got shortages of water. There's a shortage of feed so they're relying on imported feed for the cows and they've got a big issue with skilled labour. They just don't have the managers to run those farms."

Some of those issues would start to improve in the longer term, she said. "But overall, the cost of production there is very, very high. It doesn't make sense to be producing milk in a market where it's very expensive to do so, when you can import it at a cheaper price, and the product you're importing is of better quality."

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