Lenders Offer Conflicting Analysis on Chinese Milk Imports

December 17, 2015 04:53 PM

In a new report on China’s food sector, CoBank argues that slowing Chinese food imports are not the result of a slowing economy but a subsidized domestic ag sector.

“Conventional wisdom might suggest that it’s the economy,” he says Dan Kowalski, director of CoBank’s Knowledge Exchange Division. “It’s an easy target because China is the world’s largest importer of several different commodities.”

But China’s urban disposable income is still growing 10% year-over-year, he says. “This issue has been brewing for years and is a result of China’s drive to achieve food self-sufficiency. They’ve subsidized their agricultural sector to the extent that supplies have considerably outpaced increasing consumer spending and consumption."

The CoBank report cites USDA estimates, which anticipate Chinese imports of corn will decline 46%; cotton, 34%, and milk powder, 35%.

But Tim Hunt, an economist with Rabobank, says China is simply working its way through its massive inventory of dairy products purchased as a result of panic buying last spring and summer. He says lower milk prices in China mean small dairy farms are continuing to exit the business, and any new development of large farms has been shelved—at least for now. 

In either case, it could be a while before China resumes major dairy purchases from the outside world.





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