The intense pressure on global dairy markets has been ratcheting up by the recent hike in Chinese domestic milk output.

Product that was traditionally sold into China is now finding its way onto other markets, such as North Africa, piling additional pressure on exporters, Rabobank has claimed.

China grew its dairy output by a staggering 11m tonnes between 2018 and 2023.

The country’s whole milk powder (WMP) imports plunged as a consequence, falling from an average of 670,000 tonnes between 2018 and 2022 to 430,000 tonnes in 2023.

New Zealand has been hardest hit by this fall-off in Chinese demand for product. Exports of WMP fell by 255,000 tonnes between 2021 and 2023, with the Kiwi dairy sector forced to change its export strategy by shipping increased tonnage of skim milk powder (SMP) and cheese.

Since 2022, New Zealand has significantly expanded exports of WMP to Algeria, the world’s second-largest WMP importer.

“This caused the New Zealand dairy supply domino to cascade into the European market, the traditional WMP and SMP supplier for Algeria,” explained Mary Ledman, Global Strategist for Dairy at Rabobank.

“New Zealand also diverted milk from WMP to SMP, resulting in a nearly 40% boost in its total SMP exports from 2021 to 2023, putting pressure on SMP exports from the EU and the US,” Ledman added.

While Ledman does not expect China to become a net exporter of dairy produce, she claimed the Asian giant would continue to be extremely influential in commodity markets

“It [China] nevertheless poses a significant challenge to the key dairy exporting regions, which have significant exposure to the Chinese market and will need to continue to adapt to the changing market dynamics,” the Rabobank official claimed.

“While the cost of production will play a role in competitiveness, shorter supply chains and increased trade protectionism could potentially offset these costs. China’s increased self-sufficiency may serve as an example for other countries aiming to reduce reliance on trade,” Ledman added.