A looming economic crisis in China has resulted in the production of thousands of gallons of unwanted milk due to falling birth rates and a simultaneous growth in cost-conscious consumers. The world’s top importer is now witnessing small farmers moving out of business and squeezing shipments too.
Beijing’s food security-driven efforts encouraging expansion and boosting the dairy sector, had dangerous repercussions resulting in an unprecedented milk surplus.
Marred by a sluggish economy post the COVID-19 pandemic and an increasingly ageing population, the world’s third largest producer of milk-China is currently facing a low demand for high-priced food items.
The shocking part is that milk production in China still continues to increase, as seen in statistics. It surged to 42 million tonnes in 2023, from 30.39 million tons in 2017. The unprecedented milk production has surpassed Beijing’s 2025 target of 41 million tonnes.
On the other hand, many loss-making farmers have either shut their businesses or sold their cattle for beef (another oversupplied market) due to the gradual drop in the cost of milk since 2022. For instance, China’s major producer firm, Modern Dairy has reported a net loss of 207 million yuan ($37.9 Million) and a halving of its dairy herd cattle at the beginning of 2024.
A significant reason behind the drop in milk consumption is also because of decreasing birth rates in the most populated country in the world. According to the published government data, China’s birth rate in 2023 was at a record low of 6.39 per 1,000 people, marking a significant fall from 12.43% in 2017.
The post-pandemic economy in China has led to belt-tightening customers who are unable to afford perishable and costly milk products like cheese, cream and butter.
However, the Chinese Dairy Association has said that the milk producers do have a backup plan in mind to manage the excess output, as they have started turning raw milk into milk powder. But remember, a lower birth rate indicates that fewer babies will need the milk powder. Hence, China is attempting to export these whole milk powders.
