China’s dairy industry is confronting a major imbalance between production and consumption, with milk output soaring to 42 million tonnes in 2023 while demand continues to weaken. The surplus has emerged as a direct consequence of Beijing’s drive for food self-sufficiency, which accelerated production through large-scale investments in modern farms and the import of high-yielding dairy cattle.
The growth has been rapid and relentless: milk output jumped from 30.39 million tonnes in 2017 to nearly 42 million tonnes in 2023, already exceeding the national target of 41 million tonnes for 2025. However, this expansion has outpaced consumer demand, creating a structural glut across the sector.
China’s per capita dairy consumption has fallen sharply — from 14.4 kilograms in 2021 to 12.4 kilograms in 2022. Analysts attribute this decline to a combination of demographic and economic headwinds, including a falling birth rate, aging population, and sluggish household spending. These trends have reduced demand for products such as baby formula, cheese, and butter, particularly among middle-income consumers seeking cheaper alternatives.
The oversupply has led to a steep collapse in raw milk prices, which in 2022 dropped below the average production cost of 3.8 yuan per kilogram. This price pressure has squeezed domestic producers, forcing many small and mid-sized farms into losses, downsizing, or outright closure. One of the country’s leading dairy producers reportedly halved its herd in a year to cut costs.
Export opportunities for surplus milk remain limited. China’s high production costs and lingering market mistrust—stemming from the 2008 melamine contamination scandal—have made foreign buyers cautious. Some farms have reportedly begun dumping milk to avoid the additional expense of processing and distribution.
The current scenario also signals a potential decline in China’s imports of commodities such as fluid milk and milk powder, potentially reshaping global dairy trade flows.
As the world’s second-largest economy grapples with this milk glut, its dairy sector faces a critical turning point: balancing self-sufficiency ambitions with sustainable demand and market stability.