Tuesday, September 4, 2012

Dairy Industry Growth in H1

In H1 the Chinese dairy industry has progressed well, according to data from the Dairy Association of China (DAC). These show the total output of dairy products at 11.5 million tonnes in H1, up by 6.6% compared with the same period in 2011. From this volume, 9.7 million tonnes (84.3%) comprised liquid milk products, a category which increased by 7.3%. It is likely that the total output of dairy products in 2012 will exceed the 23.9 million tonnes seen in 2011, according to CCM International’s July issue of Dairy Products China News.

The key production area remains Inner Mongolia Autonomous Region (IMAR), which produced 250,000 tonnes of dairy products (of which 200,000 tonnes of liquid milk products) in June. Overall its output stood at 1.56 million tonnes (1.27 million tonnes liquid) in H1. The region’s volumes went down and are counter to the overall trend, likely reflecting its reliance on WMP, a product category badly hit by the declining consumer confidence in local product.

The other leading regions are Hebei, Shandong and Heilongjiang. Shandong is the standout, with much the strongest development of these key areas – up 16.5% overall and 20% in liquid milk products compared with H1 2011.Strong milk supply appears to be a key factor driving the growth in Shandong’s figures: the province had 1.42 million cows and produced 4.6 million tonnes of milk in 2011, accounting for 12.6% of national production. Moreover 44% of dairy farms had 200+ head.

Strong milk supply growth has been a factor behind the rising output: the Ministry of Agriculture puts production at 15.7 million tonnes in H1, representing growth of 3.6% compared with H1 2011. This is timely but will not meet demand, as many of the larger dairy enterprises such as Bright Dairy, Yili and Mengniu have expanded their production capacity in 2011-2012. Producers have been encouraged by stable milk prices and the supply growth reflects a series of government policies geared toward promoting the development of commercialscale production, such as the 12th 5-Year Development Plan of the Livestock Industry (please see Dairy Products China News Vol.4 Nov. issue, p11).

The latest figures seem to fit with the data released in late April by the China Economic Monitoring and Analysis Centre (CEMAC, part of the National Bureau of Statistics of China or NBSC). Its “Prosperity Index” (calculated from a variety of economic data on the domestic dairy industry’s performance) stood at 99.4 for Q1 2012, up 0.2 over Q4 2011. This seems significant: during that last Q the Index was 98.5, down 0.2 from the Q3 figure of 98.7 – this had been the first decline in 2011. The Index seems likely to keep increasing given the work being put in by processors and governments to improve the management of food safety.

China’s consumption of liquid milk products has been widely reported as likely to reach 23 million tonnes in 2012, an increase of 2 million tonnes over 2011, so the local output growth is meeting a growth market, albeit one with increasing international competition. But at 6.6% the growth rate of overall dairy industry output in H1 is lower than the 13.9% (to 10.8 million tonnes) achieved in H1 2011, according to the data from DAC. A similar situation is expected during H2 this year, potentially challenging many local dairy enterprises as they seek to make the most of the booming market.

Meanwhile import demand remains strong.

Content of Dairy Products China News 1207:
Dairy Industry Growth in H1
Signs of the Growing Cheese Market
Strengthened Supervision + Increasing Concern = More Food Incidents
Government Plan for Build Food Safety Supervision System
New Website for Quality Management of Food Enterprises
Arla Foods + Mengniu + Biostime: Cooperation Arrangements
Junlebao Dairy Cooperation with BOC
Pengxin Targets Domestic Raw Milk
New Hope Dairy Signs A New Farm
Dairy Industry Benefits from the Development of Grassland
Tianyou Dairy Launches New Yoghurt
Dumex Launches New Formula

Dairy Products China News, a monthly publication issued by CCM International on the 30th/31st of every month, brings you the latest information on new market dynamics, company dynamics, new dairy products and consumption trend, new legislations and policies and raw milk supply dynamics that are shaping the market.

About CCM International
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