BEIJING – China is awash in unwanted milk as falling birth rates and cost-conscious consumers have cut demand even as dairy farms expanded in recent years, forcing smaller farmers out of business and squeezing shipments into the world’s top importer.
China’s milk surplus illustrates the unintended consequences of Beijing’s food security-driven efforts to boost its dairy sector by touting consumption and encouraging expansion.
Limiting the industry’s export opportunities are high costs and the legacy of the 2008 scandal when baby formula adulterated with the chemical melamine killed at least six children and hospitalized thousands.
Weighed down by a sluggish economy that has weakened demand for higher-priced foods like cheese, cream and butter, as well as an ageing population, Chinese milk consumption fell from 14.4kg per capita in 2021 to 12.4kg in 2022, the last year for which data from China’s statistics bureau is available.
At the same time, milk output in China, the world’s third-largest producer, surged to nearly 42 million tonnes in 2023, from 30.39 million tons in 2017, surpassing Beijing’s 2025 target of 41 million tonnes.
Chinese milk prices have fallen since 2022 to below their average production cost, causing many loss-making farms to shut and other farms to shrink their herds by selling cattle for beef – another oversupplied market.
Modern Dairy, one of China’s major producers, reported a halving of its dairy cattle herd in the first half of 2024, posting a net loss of 207 million yuan (S$37.9 million).
“Dairy farming companies are losing money on selling milk and selling meat,” said Mr Li Yifan, head of dairy (Asia) at commodity financial services firm StoneX.
China’s dairy industry mushroomed after Beijing’s 2018 call for more farms and higher output, part of the wider push for greater food self-sufficiency, spurred a proliferation of farms