China Dairy Market Review & Outlook 2010-2011

This report presents a panoramic view of China’s dairy industry in 2010, including raw milk and dairy production, dairy products consumption, dairy products trade, raw milk and dairy products price trends, the running of China’s dairy industry, competition situation of China’s dairy market, operating performance, investment of dairy companies, the world dairy market trends, the production, consumption and trade of main dairy producing and trading countries, the impact of the world dairy market on China’s dairy industry, and predict of the development trend of China’s dairy industry in 2011.

Chapter 1 Overview of China’s Dairy Industry in 2010..........1
1.1 Raw Milk Production.........1
1.1.1 Slight Slip of Dairy Cattle Inventory. .......1
1.1.2 Minor Growth of Raw Milk Production....1
1.2 Dairy Processing.1
1.2.1 Continual Fast Growth of Liquid Milk Production. ...........1
1.2.2 Continual Rally of Solid Dairy Production............1
1.3 Dairy Trade............2
1.3.1 Continual Marked Growth of Dairy Import.............2
1.3.2 Continual Sluggishness of Dairy Export.2
1.4 Dairy Consumption............2
1.4.1 Rally of Per Capita Possession Volume of Milk..2
1.4.2 Steady Per Capita Dairy Consumption by Urban Residents........2
1.5 Dairy Price3
1.6 Operation of the Dairy Industry.......3
1.7 Restructuring of the Industry...........3
1.8 Dairy Industry Policy............4
Dairy Industry Policy.....4
Chapter 2 Policy Environment for China’s Dairy Industry in 2010........5
2.1 Overview of Relevant Policies, Standards and Plans...........5
2.2 Policy...........5
2.2.1 Major Content of the “Circular on Further Strengthening Dairy Quality and Safety Work from the
General Office of the State Council” and Impact on Dairy Industry........ 5
2.2.2 Major Content of the “Examination Rules on Prerequisites for Dairy Production of Companies (2010 version)” and Impact on Dairy Industry........... 6
2.2.3 Major Content of “Examination Rules on Prerequisites for Production of Infant/young Child’s Formula
Milk Powder of Companies (2010 version)” and Impact on Dairy Industry...7
2.2.4 Major Content of the “Special Fund from Central Finance for Animal Breed Improvement in 2010”.8
2.3 Standards.....8
2.3.1 Major Contents of 66 National Standards on Dairy Quality and Safety. .......8
2.3.2 Impact from the New National Standard on Dairy Quality and Safety to Dairy Industry .........9
2.3.3 Stipulations of the “General Requirements on Labels of Edible Essence”........10
2.3.4 Stipulations of the New “Food Nutrition Enriching Agents”........10
2.4 Plans...........11
2.4.1 Major Content of the “National Dairy Farming Development Plan” (2009-2013).11
2.4.2 Impact on Dairy Industry from the Plan........12
Chapter 3 Dairy Production in China in 2010.......13
3.1 Raw Milk Production.13
3.1.1 Overview....13
3.1.2 Dairy Cattle Inventory..........13
3.1.3 Raw Milk Production............14
3.1.4 Regional Layout of Dairy Farming...15
3.1.5 Raw Milk Procurement Price.............15
3.1.6 Dairy Farming Modes...........16
3.1.7 Dairy Farming Profit.16
3.1.8 Feed Price...17
3.2 Dairy Processing........19
3.2.1 Liquid Milk...19
3.2.2 Solid Dairy Products.23
3.2.3 Milk Powder..25
3.2.4 Other Solid Dairy Products.....26
Chapter 4 China’s Trade of Dairy Products in 2010.........28
4.1 Dairy Import.....28
4.1.1 Overview........28
4.1.2 Import Structure.........28
4.2 Milk Powder Import.......29
4.2.1 Import Quantity...........29
4.2.2 Import Structure.........30
4.2.3 Source of Import........31
4.2.4 Destination of Import.31
4.2.5 Importation Price........32
4.2.6 Web Quote of Fonterra Full-cream Milk Powder...........33
4.3 Whey Import.......34
4.3.1 Import Quantity...........34
4.3.2 Source of Import.........34
4.3.3 Destination of Import...35
4.3.4 Importation Price..........36
4.4 Import of Milk Fat.............36
4.4.1 Import Quantity.............36
4.4.2 Source of Import............37
4.4.3 Importation Price...........37
4.5 Cheese Import....38
4.5.1 Import Quantity.38
4.5.2 Source of Import............39
4.5.3 Importation Price Analysis........ 40
4.5.3 Importation Price............40
4.6 Import of Fresh Dairy Products.....41
44.6.1 Import Quantity.............41
4.6.2 Source of Import............41
4.6.3 Importation Price...........41
4.7 Yogurt Import.......42
4.7.1 Import Quantity.42
4.7.2 Importation Price............42
4.8 Lactose Import.....43
4.9 Import of Infant/young Child’s Formula Milk Powder......44
4.10 Import of Dairy Cattle and Their Bio Products.....45
4.10.1 Import Quantity.............45
4.10.2 Importation Price........46
4.11 Alfalfa Import....46
4.11 Dairy Export......47
4.11.1 Overview........47
4.11.2 Structure of Dairy Export.........47
4.11.3 Fresh Dairy Export.....48
4.11.4 Milk Powder Export....50
Chapter 5 Dairy Consumption in China in 2010.......54
5.1 Overview54
5.2 Structure of Dairy Consumption by Urban Residents......57
5.3 Dairy Consuming Regions of Urban Residents.58
5.4 Dairy Consumption by Rural Residents.63
5.5 Retail Price of Dairy Products.....63
5.5.1 Fresh Milk Price............63
5.5.2 Yogurt Price.....64
5.5.3 Price of Formula Milk Powder..64
5.6 Prices of Dairy Ingredients..........65
5.6.1 Lactose Price..65
5.6.2Whit Sugar Price............66
Chapter 6 Competitiveness of Dairy Market in China in 2010.............67
6.1 Overview.67
6.2 Market Competition of Raw Milk..67
6.3 Market Competition of Infant/young Child’s Formula Milk Powder..........68
6.3.1 Market Environment......68
6.3.2 Market Share of Major Competitive Brands........69
6.4 Market Competition of Liquid Milk70
6.4.1 UHT Milk..........70
6.4.2 Yogurt.71
6.4.3 Pasteurized Milk...........71
6.4.4 Yogurt Drinks..72
Chapter 7 Main Dairy Processing Companies in 2010.........73
7.1 Yili...........73
7.1.1 Business Revenue......73
7.1.2 Market Competition Status.......76
7.1.3 Operational Strategy and Measures of Yili in 2010.......76
7.1.4 Prospect of Yili.77
7.2 Mengniu..77
7.2.1 Operating Revenue...... 77
7.2.2 Market Competition Status........78
7.2.3 Background and Impact from Mengniu’s Acquisition of Junlebao.......79
7.2.4 Prospect of Business Revenue of Mengniu.......80
7.3 Bright Dairy..........81
7.3.1 Operating Revenue.......81
7.3.2 Market Competition Status.......83
7.3.3 Operational Strategy and Measures of Bright Dairy in 2010.......84
7.3.4 Prospect of Bright Dairy.............84
7.4 Sanyuan Dairy........84
7.4.1 Operating Revenue.......84
7.4.2 Market Competition Status........87
7.4.3 Evaluation of Hebei Sanyuan Operating Revenue.........87
7.4.4 Prospect of Sanyuan Dairy........88
7.5 Wondersun..........88
7.5.1 Operating Revenue.......88
7.5.2 Market Competition Status........90
7.5.3 Prospect of Wondersun.............90
7.6 Yinqiao...90
7.6.1 Operating Revenue......90
7.6.2 Market Competition Status.......91
7.6.3 Prospect of Yinqiao......91
7.7 Feihe......91
7.7.1 Operating Revenue.....91
7.7.2 Market Competition Status......93
7.7.3 Prospect of Feihe........93
7.8 New Hope Dairy.............94
7.8.1 Operating Revenue....94
7.8.2 Market Competition Status.....96
7.8.3 Prospect of New Hope Dairy..99
7.9 Nestle100
7.9.1 Operating Revenue.100
7.9.2 Prospect of Nestle...101
7.10 Dumex...........101
7.10.1 Operating Revenue.101
7.10.2 Prospect of Dumex.............102
Chapter 8 Development of Dairy Processing Industry in China in 2010析.............103
8.1 Overview.........103
8.2 Operational Capability of Dairy Processing Industry...104
Chapter 9 Status of World Dairy Market in 2010...106
10.1 10.1 Overview.............106
10.1.1 Production of Milk and Dairy Products.........106
10.1.2 Trade of Dairy Products......106
10.1.3 World Dairy Price.....107
10.2 Dairy Market Status of Main Dairy Producing and Trade Countries in 2010.......109
10.2.1 New Zealand............109
10.2.2 Australia...116
10.2.3 USA..........123
10.2.4 EU............129
10.2.5 10.2.5 India...140
Chapter 10 Outlook of China’s Dairy Industry in 2011.........149
10.1 Overview.........149
10.2 Raw Milk Production...151
10.2.1 Dairy Cattle Inventory.............151
10.2.2 Milk Production.........151
10.2.3 Raw Milk Layout....151
10.3 Dairy Processing. .......152
10.3.1 Main Dairy Products.152
10.3.2 Other Dairy Products153
10.3.3 Marginal Dairy Products.........154
10.4 Forecast on Dairy Trade............155
10.4.1 Import155
10.4.2 Export156
10.5 Price Trend of Raw Milk and Dairy Products.......156
10.5.1 Raw Milk Price...........156
10.5.2 Dairy Price...156
10.6 Forecast on Dairy Consumption............157
10.7 Forecast on Dairy Competition Pattern.157
Annexes...158
Annex I: Raw Milk Supply and Demand Balance of China, 2009-2011............158
Annex II: WMP Supply and Demand Balance of China, 2009-2011...158

Figures & Tables
Figure 3-1 Changing Trend of Dairy Cattle Inventory, 1997-2010........14
Figure 3-2 Changing Trend of Gross Raw Milk Production, 1996-2010...........14
Figure 3-3 Average Price Trend of Raw Milk in the 10 Producing Provinces, 2008-2010...........15
Figure 3-4 Cow Cattle Raising Efficency Change, by Month, 2009-2010..........17
Figure 3-5 Trend of Average Corn Spot Price, by Month, 2008-2010....18
Figure 3-6 Average Trend of Soymeal Spot Price, by Month, 2008-2010...........18
Figure 3-7 Output of Liquid Milk and the Trend, 2000-2009.....19
Figure 3-8 Output of Liquid Milk and the Trend, by Month, 2005-2009.19
Figure 3-9 Shares of Main Liquid Milk Producing Provinces in the National Total, 2010............20
Figure 3-10 Comparison of Liquid Milk Output among Provinces, 2010............21
Figure 3-11 Composition of Liquid Milk, 2000-2010...21
Figure 3-12 UHT Milk Production and Growth Rate, 2001-2010...........22
Figure 3-14 Pasteurized Milk Production and Growth Rate, 2001-2010...........22
Figure 3-14 Yogurt Production and Growth Rate, 2001-2010..22
Figure 3-15 Changing Trend of Production of Solid Dairy Products, 1957-2010...........23
Figure 3-16 Changing Trend of Production of Solid Dairy Products, by Month, 2006-2010 ......23
Figure 3-17 Output of Solid Dairy Products of Different Regions, 1998-2010..24
Figure 3-18 Production of Solid Dairy Products of Main Provinces, 2003-201025
Figure 3-19 Proportion of Production of Solid Dairy Products of Main Provinces in National Total, 2010 ............25
Figure 3-20 Changing Trend of Production of Milk Powder, 1997-2010.26
Figure 3-21 Proportion of Production of Milk Powder of Main Provinces in National Total, 2010 26
Figure 4-1 Trend of Import of Milk Powder, by Month, 2005-2010.............30
Figure 4-2 Changes of Structure of Milk Powder Import (by Quantity), 2003-2010............30
Figure 4-3 Trend of CIF Price of Milk Powder, by Month, 2005-2010.......33
Figure 4-4 Trend of Import Price (CIF) of Whey Product, by Month, 2005-2009..36
Figure 4-5 Trend of Import of Butter and Anhydrous Cream, by Volume, by Month, 2004-2010.36
Figure 4-6 Origins of Milk Fat Import and Changes, 2003-2010.............37
Figure 4-7 Trend of Import Price (CIF) of Butter and Anhydrous Cream, 2005-2010.....37
Figure 4-8 Structure of Cheese Import, by Quantity, 2010.........38
Figure 4-9 Trend of Cheese Import, by Quantity, 2004-2010......39
Figure 4-10 Trend of Cheese Import, by Structure, 2004-2010..39
Figure 4-11 Trend of Import Price (CIF) of Cheese, 2004-2010.40
Figure 4-12 Origins of Fresh Milk (HS0401) Import, 2010...........41
Figure 4-13 Trend of Import Price (CIF) of Fresh Dairy Products, by Month, 2005-2010..42
Figure 4-14 Trend of Import Price (CIF) of Yogurt, by Month, 2005-201043
Figure 4-15 Trend of Import Price (CIF) of Anhydrous Lactose, by Month, 2005-2010.....44
Figure 4-16 Trend of Import Volume and Price (CIF) of Infants Formula Milk Powder, 2000-2010............45
Figure 4-17 Origins of Infants Formula Milk Powder (HS19011000) Import, 2010. ........45
Figure 4-18 Structure of Dairy Products Export (by Quantity), 2010. .......48
Figure 4-19 Changing Trend of Monthly Fresh Milk Export, by Month, 2007-2010. ..........48
Figure 4-20 China Milk Powder Exports Trend, by Month, 2007-2010. ..51
Figure 4-21 Structure of Exported Milk Powder of China, by Volume, 2010. .......51
Figure 4-22 China Milk Powder Export Market Share, by Volume (Unit: MT), 2010. .........53
Figure 5-1 Structure of Dairy Consumption of Urban Residents, by Volume, by Quarter, 2005-2010 .....58
Figure 5-2 Structure of Dairy Consumption of Urban Residents, by Value, by Quarter, 2005-2010 .........58
Figure 5-3 Per Capita Consumption Amount of Milk and Dairy Products of Rural Resident, 1992-2010 63
Figure 5-4 Price Trend of Fresh Milk of Urban Market, by Quarter, 2005-2010. ....64
Figure 5-5 Price Trend of Yogurt of Urban Market, by Quarter, 2005-2010. ...........64
Figure 5-6 Price Trend of Small-pack Milk Powder of Urban Market, by Quarter, 2005-2010 .........65
Figure 5-7 China Import Price (CIF) of Anhydrous Lactose, by Month, 2005-2010............. 66
Figure 5-8 Trend of Wholesale Spot Price of White Sugar, 2000-2010. ...66
Figure 6-1 Changes of Market Share of Foreign and Domestic Famous Brands of Infant Formula Milk Powder, by Sales Value, Jan-Jun, 2009-2010. .....70
Figure 6-2 Changes of Market Share of Domestic Famous Brands of UHT Milk, by Sales Value, Sep 2009 to Sep 2010 .....70
Figure 6-3 Changes of Market Share of Domestic Famous Brands of Yogurt, by Sales Value, Sep 2009 to Sep 2010 .....71
Figure 6-4 Changes of Production Share of Domestic Famous Brands of Pasteurized Milk, 2008-2009 72
Figure 6-5 Changes of Market Share of Domestic Famous Brands of Acidified Drinks, by Sales Value, Sep 2009 to Sep 2010. ...........72
Figure 9-1 Cheddar Cheese Price (FOB), 2005-2010. ...107
Figure 9-2 Average Winning Price (FOB) of AMF, 2001-2010. ....108
Figure 9-3 Average Winning Price (FOB) of WMP, 2001-2010. ..108
Figure 9-4 Average Winning Price (FOB) of SMP, 2001-2010. ....109
Figure 9-5 Average Cow Numbers per Herd and Average Milk Fat Production per Cow (calendar year).112
Figure 9-6 Milk Production, Cows in Milk and Average Farm Gate Prices. ........113
Figure 9-7 Average On-Farm Milk Solids Production Compared with Stocking Rates. .113
Figure 9-8 Australia Dairy Cattle (000’ head), 2000/01-2010/2011. ...118
Figure 9-9 Australian Butter Production and Exports, 2001/02-2010/2011. .......121
Figure 9-5 American Milk Price Trend, 2000-2011($/cwt)...........125
Figure 9-6 American Cheese Production, by Month, 2006-2010. ...........126
Figure 9-7 American Cheddar Cheese Prices (FOB) Trend, 2005-2010126
Figure 9-8 American Dried Whey Production, by Month, 2006-2010. .....126
Figure 9-9 American Dried Whey Prices (FOB) Trend, 2005-2010.............127
Figure 9-10 American SMP (human) Production, by Month, 2006-2010. .............127
Figure 9-11 American SMP (human) Prices (FOB) Trend, 2005-2010. .127
Figure 9-12 American Butter Production, by Month, 2006-2010. ...........128
Figure 9-13 American Butter Prices (FOB) Trend, 2005-2010. 128
Figure 9-14 American Lactose Production, by Month, 2006-2010..........129

Table 4-1 Import of Dairy Products, 2009-2010....28
Table 4-2 Changes of Structure of Dairy Import, by Quantity, 2009-2010. 29
Table 4-3 Source of Milk Powder Import and Changes, by Quantity, 2009-2010...31
Table 4-4 Flow of Milk Powder Import (Quantity), 2010....32
Table 4-5 Changes of Online Auction Price (1) of Whole Milk Powder from Fonterra, 2008-2010...33
Table 4-6 Origin of Whey Import and Changes of Proportion in Total Import, 2009-2010..35
Table 4-7 Destination of Imported Whey, by Volume, 2009-2010....35
Table 4-8 Origins of Cheese Import, by Volume, 2010....40
Table 4-9 China Import Volume of Quality Breeding Cattle and Biologic Products, 2007- 2010 ........46
Table 4-10 China Import Price of Quality Breeding Cattle and Biologic Products, 2007- 2010 .............46
Table 4-11 China Dairy Products Export, 2010. 47
Table 4-12 Comparison of Monthly Import and Export Prices of Fresh Milk, 2007-2010.........49
Table 4-13 Comparison of Export Prices & Import Prices of Milk Powder of China, 2007-2010.. 51
Table 5-1 Per Capita Dairy Possession Amount and Forecast, 1992-2010. ............54
Table 5-2 Per Capita Dairy Consumption of Urban Residents, 1992-2010. ...........55
Table 5-3 Changes of Per Capita Expenditure on Dairy Consumption of Urban Residents, by Quarter, 2006-2010....... 56
Table 5-4 Changes of Per Capita Dairy Consumption of Urban Residents of Different Provinces, 2008-2010 ......59
Table 5-5 Changes of Per Capita Fresh Milk Consumption of Urban Residents of Different Provinces, 2008-2010 ........60
Table 5-5 Changes of Per Capita Yogurt Consumption of Urban Residents of Different Provinces, 2008-2010 ....61
Table 5-7 Changes of Per Capita Milk Powder Consumption of Urban Residents of Different Provinces, 2008-2010............ 62
Table 7-1 Total Profit of Yili, 1st half of 2010.........74
Table 7-2 Total Profit of Yili, 1st Three Quaters of 2010....74
Table 7-3 Core Business of Yili, 1st half of 2010..75
Table 7-4 Core Business by Region of Yili, 1st half of 201075
Table 7-5 Total Profit of Mengniu, 1st half of 2010.78
Table 7-6 Revenue of Different Products of Mengniu, 1st half 2010...........78
Table 7-7 Total Profit of Bright Dairy, 1st half 2010............82
Table 7-8 Total Profit of Bright Dairy, 1st Three Quarters 2010...82
Table 7-9 Core Sector of Bright Dairy, 1st half 2010..83
Table 7-10 Core Sector by Region of Bright Dairy, 1st half 2010.........83
Table 7-11 Total Profit of Sanyuan Food, 1st half 2010.............85
Table 7-12 Profit of Sanyuan Foods (Mother) 1st Three Quarters of 2010........ 86
Table 7-13 Core Sector of Sanyuan Food, 1st half 2010...........86
Table 7-16 Core Sector by Region of Sanyuan Food, 1st half 2010........86
Table 7-15 Dairy Production of Wandersun Dairy, 2009-2010.89
Table 7-16 Dairy Production of Yinqiao Dairy, 2009-2010........91
Table 7-17 Total Profit of Feihe Dairy, by Quarter, 2010.............92
Table 7-18 Total Profit of New Hope, 1st half 2010.......94
Table 7-19 Total Profit of New Hope, 1st Three Quarters of 2010.........95
Table 7-20 Core Sector of New Hope Agriculture, 1st half 201096
Table 7-21 Subsidairy Companies Equity-controlled by New Hope Dairy, 2010.............96
Table 9-1 Development Indices of Dairy Industry, 2002-2010103
Table 9-2 Asset Management Ratio of Dairy Industry, 2002-2010.......104
Table 9-1 Profitability of Dairy Farming (NZ dollars per kilogram of milk solids)...........114
Table 9-2 Payout Prices by NZ Dairy Cooperatives (Per Kg of Milk Solids).......114
Table 9-3 Supply and Demand of Raw Milk of New Zealand, 2009-2011..........114
Table 9-4 Supply and Demand of Butter of New Zealand, 2009-2011.115
Table 9-5 Supply and Demand of Cheese of New Zealand, 2009-2011...........115
Table 9-6 Supply and Demand of SMP of New Zealand, 2009-2011....116
Table 9-7 Supply and Demand of WMP of New Zealand, 2009-2011...116
Table 9-8 Supply and Demand of Raw Milk of Australia, 2009-2011.....119
Table 9-9 Supply and Demand of Cheese of Australia, 2009-2011......120