CHINA – China’s raw milk production will reach 36 million metric tons (MMT) in 2022, according to a Global Agricultural Information Network report from the Foreign Agricultural Service of the US Department of Agriculture (USDA).

 According to the report, the forecast which is 4.5 percent higher than 2021 is due to a larger dairy herd and improved efficiency.

However, raw milk price declines, higher feed costs, and market uncertainties generated by China’s COVID-19 policies will weigh on raw milk production in 2022.

In 2022, Fluid milk domestic distribution is estimated at 40.95 MMT driven by consumer demand for dairy products in the retail and food processing sectors.

Import growth in 2022 is, on the other hand, expected to slow to 1.3 MMT due to higher global prices and competition with domestic production.

Whole Milk Powder (WMP) production is expected to increase slightly to 1.02 MMT as producers convert seasonal surplus raw milk to WMP.

Consumption is estimated to reach nearly 1.9 MMT, mainly driven by demand from the bakery sector and manufacturers of dietary supplement beverages.

Its use as an ingredient for infant formula is however declining as the country’s contracting birth rate is impacting demand for infant formula.

The import estimate for WMP in 2022 has reduced to 820 thousand metric tons (TMT) from 849 TMT in 2021.

Skimmed Milk Powder (SMP) production is estimated at 24 TMT. Production is expected to remain low as China does not produce sufficient cream or butter to support a meaningful expansion of SMP.

Post officials forecast total domestic consumption at 423 TMT with a year-on-year decline of 5 percent due to a larger supply of WMP in the market.  Imports are also reduced to 400 TMT due to lower market demand.

China’s cheese production in 2022 is estimated at 20 TMT, as local producers expand production, at a pace like 2021.

Post officials have reduced consumption estimates to 190 TMT from 194 TMT in 2021 due to the impact of China’s COVID-19 restrictions.

Food service is a major channel for cheese distribution and consumption and 2022 lockdowns and continued restrictions on food service, including in affluent cities such as Shanghai and Shenzhen, negatively impacted consumption.

Any prolonged lockdowns are expected to lead to further declines in cheese consumption and HRI spending in 2022, according to the report.

China’s butter production is estimated at 12 TMT while imports are estimated at 150 TMT, 8 percent higher than in 2021.

The higher raw milk costs make domestic butter production more expensive than imported butter, but growth is being seen in 2022 ,driven by an immediate need for butterfat as an ingredient in value-added products.

Butter consumption is estimated at 160 TMT driven by the bakery and food service sectors, which rely on imported butter products. Butter imports are based on China Customs data.

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