US farmers eye up New Zealand share of China dairy market

by Toby Manhire / 24 April, 2012
Californian farmers are investing in a bigger scoop of the NZ-dominated China milk powder rush, reports the Wall Street Journal.
While Fonterra farmers debate the merits of the new Trading Among Farmers scheme and sweat over the impact of the Crafar farms sale, a bigger threat to their livelihoods may be on the horizon, in the form of American farmers waking up to the need to meet their dairy potential in China, and moving to target New Zealand domination.

In a report headlined “Farmers retool to feed China”, the Wall Street Journal explains that, with limited opportunities at home, Californian dairy farmers are investing millions of dollars in their pursuit of the Chinese milk power market – now the world’s largest.

California's agricultural Central Valley has thrived for decades on Americans' seemingly endless appetites. Now, with US market growth slowing, farmers are going after a different group of consumers: middle-class Chinese attracted to Western fare like milk and almonds.

The second biggest American dairy collective, California Dairies Inc, is changing its technology to serve Chinese demands for product better suited to enduring at room temperature, the Journal reports.

The company opened a new plant in 2009 with machinery capable of making longer-lasting powder, and it plans another facility with even more equipment within five years. The goal: getting China sales up to one-third of the company's exports, from about 5% today.

And the New Zealand domination appears to be very much in their sights.

Chinese demand for American food is linked to shifting tastes, limited domestic supply and concerns about the quality of domestic products. But when it comes to milk, American producers have lagged behind their rivals in New Zealand. On a recent grocery trip, 23-year-old Beijing finance worker Huang Xin said she would buy American milk if she could find any in her usual markets. Ms. Huang looks for New Zealand labels or Chinese brands that haven't been caught up in safety scandals.

"I just want something that tastes good and that isn't going to hurt me," Ms. Huang said.

New Zealand, the top milk exporter in the world, has benefited for years from an early investment in exports, and it sold about 379,700 tons of milk powder to China in 2011, up 10% from the previous year, according to the Global Trade Information Services. By comparison, the U.S. exported 14,900 tons last year, down 4% from 2010, according to the US Department of Agriculture.

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