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Why did the import of whey powder grow against the trend during the epidemic?

Echemi 2020-07-29

Since the global outbreak of the new crown pneumonia epidemic, the normal supply of global agricultural products has been disrupted, and the international trade of most agricultural products has fallen sharply. In this context, my country's whey powder imports still maintain a growth momentum, with imports reaching 166,000 tons from January to April, an increase of 11.4% year-on-year. For larger agricultural products, although the total import volume of whey powder is not large, it is an indispensable and important imported variety in my country. Why did the import performance of whey powder differ from most other agricultural products during the epidemic? Is the supply of whey powder in my country guaranteed?

What is whey powder?

Whey is a natural by-product produced when dairy companies use milk to make cheese or casein. The liquid whey becomes whey powder after drying and processing, which has many uses. High-quality whey powder is mainly used in the production of infant formula milk powder. The protein ratio can be adjusted to make the milk powder easy for babies to digest and absorb. The content of formula milk powder is about 40%-50%; medium-quality whey powder can be used to produce cakes and bread Other processed foods are used as supplementary materials to improve the taste of food; those with poor quality are used as feed additives for young animals.

Where does our country's whey powder come from?

Since the output of dry dairy products (such as cheese, butter, etc.) other than milk powder in China is very low, with an annual output of about 1 million tons, accounting for only 4% of the total output of dairy products in China, there is very little whey powder produced as a by-product. Domestic production and consumption demand mainly relies on imports, which belong to a variety of agricultural products with a "rigid" demand gap. With the popularity of infant formula milk powder, China's whey powder imports increased rapidly from 263,000 tons to 451,000 tons from 2010 to 2019, of which it reached a historical peak of 555,000 tons in 2018, accounting for approximately the total dairy product imports that year 1/5.

Nearly 90% of my country's imported whey powder comes from the United States and the European Union (including the United Kingdom, the same below). In 2019, affected by the Sino-U.S. trade friction, the EU surpassed the U.S. to become China’s largest source of whey powder imports for the first time. China’s EU and U.S. whey powder imports were 204,000 tons (45%) and 162,000 tons respectively ( 36%). Among them, imports from the EU are mainly high-end whey powder for processing infant formula milk powder, with an average import price of nearly 2,000 US dollars/ton; imports from the United States are mostly low-end whey powder for milk powder processing and feed additives. The average import price is less than US$1,000/ton.

Is the import of whey powder in my country guaranteed during the epidemic?

During the fight against the epidemic, my country's rigid import demand for whey powder has not changed. Is the supply of whey powder in my country guaranteed? First, let's take a look at the production situation of each main producing area.

European Union. The EU is also the world's largest producer of whey powder, with an annual output of about 1.9 million tons, accounting for about 60% of the world's total output, of which 30% is for export. In the first quarter of 2020, despite the “collision” between the epidemic and the high-yield period of dairy cows, the production of dairy products in the European Union was not affected much, and the output increased steadily. Among them, the purchase of raw milk increased by 2.5% year-on-year, and the output of dairy products such as fresh milk, cheese and butter increased by 3.2%, 2.5%, and 2.7% respectively. Since whey powder is an inevitable by-product in the production of cheese and other dry dairy products, the increase in the output of dry dairy products means the increase in the output of whey powder.

United States. The U.S. whey powder production ranks second in the world, with an output of about 440,000 tons in 2019. About half of US whey powder is used for domestic consumption and half is used for export. The main export markets in 2019 are China (approximately 24% of exports), Mexico (14%) and the Philippines (9%). In the first quarter of 2020, the output of American whey powder was about 110,000 tons, a year-on-year increase of 4%. Among them, the output in March had the highest year-on-year increase of 5.4%. It can be seen that the epidemic did not cause much adverse impact on the production of American whey powder.

Secondly, let's look at the attitudes of major producing areas to the export of whey powder. Regardless of the EU or the United States, the impact of the epidemic on agriculture is mainly reflected in the decline in prices caused by weak demand, which is what we often call "difficult to sell", and livestock products are most affected by the decline in prices. According to the assessment of the United States Agricultural Industry Organization, the loss caused by the price drop is more than 8 billion US dollars in the dairy industry. In order to make up for the losses of producers and keep the supply chain running, the United States launched a US$19 billion food aid program in April, and the European Union also introduced subsidies for commercial storage of dairy products (including cheese) and meat. Therefore, the two major producing areas are very willing to expand the export of whey powder.

At the beginning of 2020, the first phase of the Sino-US economic and trade agreement will be implemented. Starting from March, Chinese companies can apply for exemption from tariffs on imported whey powder from the United States within one year, which has strongly boosted the willingness of Chinese companies to import from the United States. From January to April, imports of whey powder from the United States amounted to 72,000 tons, an increase of 47.3% year-on-year; imports from the European Union amounted to 67,000 tons, an increase of 2.6% year-on-year. According to statistics from the United States Department of Agriculture, exports of American whey powder in the first quarter increased by 13% year-on-year, of which exports to China increased by 24% year-on-year. In view of the fact that expanding dairy exports to China is a key content of the US in the first phase of the Sino-US agreement, China's whey powder import not only has a relatively sufficient guarantee, but also will fulfill the commitments of the first phase of the agreement and stabilize Sino-US economic and trade relations. Make a contribution.

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