New Zealand's dairy opportunities in China

Abstract

Increasing demand from China for internationally sourced milk powder has, in recent years, been underpinning prices for New Zealand dairy products. China is now by far the most important destination for these products. Without the increase in Chinese demand, international markets could not have absorbed the increased volumes coming out of New Zealand and the United States. The main reason for the large increase in demand can be traced back to the widely publicised melamine disaster of 2008. This, together with a raft of other food scandals less publicised in the west but well known to the Chinese, led to Chinese consumers losing confidence in their own food industries. However, it was not only consumers. The Chinese government also lost confidence in the existing dairy industry and it has directed that there must be major change. Specifically, the dairy industry is now moving to an industrialised model based on dairy herds of 3,000 to 5,000 cows, with individual companies owning multiple herds of this scale. In this article we discuss the implications for New Zealand of this change, together with the other changes occurring in China which will continue to influence Chinese demand for imported dairy products.