Domestic demand boosts Chinese dairy presence

By Neil Merrett

- Last updated on GMT

Related tags Dairy United states Milk

China has overtaken Russia and Pakistan to become the world's third
largest processor of dairy products, according to the director of
the country's dairy association.

Liu Chenguo revealed that dairy processing within the country increased by 15 per cent during 2006 to reach an output of 32.9m tonnes, the China Securities Journal reported yesterday. As China continues to develop into a leading economic and manufacturing super-power, processors within rival markets like the EU are being put under greater pressure to compete in the increasingly competitive dairy sector. With dwindling dairy supply from major dairy producers like the EU and Australia, the announcement is likely to increase concerns that the industry could begin to experience shortages of ram materials like milk amidst increasing demand. Prices in recent weeks for milk powders vital to processing have continued to rise over uncertainty regarding raw milk supply. However, such concerns appear to have done little to dent expansion within China's dairy industry. Liu attributed the continuing growth to an increase within the country's processing capacity, driven by a need to supply expanding domestic consumption of dairy products. He added that the average consumption of dairy products last year reached 25.6 kgs, a 76 per cent increase since 2000. This was a result of growing consumer markets outside of the country's major and medium-sized cities into more provincial towns and villages. Sales revenues of the major dairy processing companies operating in the country have therefore increased seven-fold since 1998 to be worth 104bn yuan (€10bn) in 2006, Liu said.

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