Post forecasts that China's raw milk production will decline in 2025 due to continued reductions in dairy herd size, despite improved per-cow yields. Imports of fluid milk and skim milk powder are forecast to decline due to relatively strong domestic production and weak demand. Post forecasts that whole milk powder imports will increase modestly due to reduced domestic production. Cheese imports are expected to rise moderately on stronger food service demand. Butter imports will increase due to growth in the baking and food service sectors, although domestic production is also expanding. Whey imports are forecast to decline due to high tariffs on U.S. product and limited capacity of alternative suppliers, despite firm demand in the feed and infant formula sectors.
EXECUTIVE SUMMARY
The forecasts and revised estimates provided in this report are issued by FAS China and are not official USDA data.
Fluid Milk: Post forecasts that fluid milk production will decline in 2025, as rising per-cow milk yields are insufficient to offset the continued contraction in dairy cow inventories. Fluid milk consumption is expected to decrease due to economic headwinds and weak consumer sentiment. Imports will decline as strong domestic output and growing pasteurized milk availability reduce demand for imported UHT milk.
Whole Milk Powder (WMP): Post forecasts that WMP production will decline in 2025 due to a tighter raw milk supply and continued financial pressure on processors. Post also forecasts that WMP consumption will decline as processors shift focus toward higher-margin products. To partially offset reduced domestic production, Post forecasts that WMP imports will increase modestly.
Skim Milk Powder (SMP): Post forecasts SMP production to rise in 2025, supported by higher butter output and favorable processing margins. SMP consumption will decline slightly due to weak demand in dairy-based beverages and food applications. Imports are expected to fall as domestic production increases and competitively priced alternatives such as raw milk and WMP become more widely used.
Cheese: Post forecasts cheese consumption to grow in 2025, primarily driven by strong demand from foodservice channels such as Western-style restaurants and fast food. Domestic cheese production will increase gradually, with growing investment in natural cheese capacity. Imports are forecast to rise modestly from higher demand.
Butter: Post forecasts butter production and consumption will both increase in 2025, supported by abundant raw milk supply and growing demand from bakery and foodservice segments, particularly in second- and third-tier cities. Imports will grow to meet rising demand, although strong early-year import volumes may normalize in the second half of 2025.
Whey and Whey Products: Post forecasts China's whey imports to decline in 2025 due to China's retaliatory tariffs on U.S. origin product even though feed and food sector demand, especially for infant formula, remains firm. Domestic production remains limited, and long-term supply risks persist.
FLUID MILK
China's Fluid Milk Imports to Decline in 2025
Post revised its 2025 fluid milk import forecast, now projecting a decline in imports. This decrease is primarily driven by weak overall market demand and the growth of domestic pasteurized milk production. Consumer preference for fresh, fluid milk, urbanization, and improvements in cold chain infrastructure have supported the steady expansion of pasteurized milk output. Local governments are also actively promoting fresh milk consumption and strengthening dairy quality standards, further boosting domestic production.
However, Post assesses that the impact of rising pasteurized milk production on fluid milk imports—particularly UHT milk—remains limited. Despite recent gains, pasteurized milk production is still relatively small and constrained by its short shelf life (typically around seven days), which limits distribution largely to urban centers with robust cold chain logistics. In contrast, imported UHT milk—shelf-stable for over six months—remains well-suited for distribution to rural and lower-tier markets. These two milk types serve distinct consumer segments and supply chains. As a result, while domestic pasteurized milk is reducing some import demand, UHT imports continue to fulfill demand in areas where fresh milk is less accessible, particularly in the premium and convenience-oriented categories.
In the first three months of 2025, China's fluid milk imports declined slightly (see Chart 1) mainly due to slow market demand. New Zealand and Germany continue to lead as China's top fluid milk suppliers. U.S. dairy products are known for high quality and consistent supply. However, pricing remains less competitive than products from New Zealand and Australia, which benefit from free trade agreements. In addition, Post learned that inspections for U.S. dairy shipments at some ports recently have intensified. Sampling rates can reach 100 percent. For these reasons, volume of milk imported from the United States remains negligible.
Chart 1. China: Imports of Fluid Milk
Source: Trade Data Monitor, LLC
Due to high additional tariffs on U.S. agricultural products, many dairy import orders were recently canceled. In response, shipping companies cut the number of sailings and reduced container availability. Some contacts anticipate that shipping costs could rise following the temporary removal of additional tariffs on May 12, which may stimulate renewed purchasing activity. However, traders emphasize that even if freight rates increase, shipping costs remain a secondary concern compared to tariff changes and regulatory risks.
WHOLE MILK POWDER
Post revised its forecast and expects China's WMP imports to increase in 2025 due to a decline in domestic production. While competitively priced domestic WMP will remain an option for cost-sensitive manufacturers, supply will be insufficient to meet total demand. In 2024, more food processors shifted toward domestic WMP due to its lower cost. However, industry contacts report that processors continue to prefer imported WMP for its consistent quality and standardized nutritional content, particularly for high-value products. As a result, imports are expected to rebound when domestic WMP availability declines.
In early 2025, WMP imports increased year-over-year (see Chart 2) while industry sources indicate inventory levels for imported WMP remain modest. New Zealand remained the top supplier. The elimination of tariff-rate quotas (TRQs) on New Zealand dairy products starting January 1, 2024, reduced the need for front-loaded purchasing in Q1. Post forecasts China’s imports to remain strong for the remainder of 2025.
Chart 2. China: Imports of WMP
Source: Trade Data Monitor, LLC
SKIM MILK POWDER
Post maintains its forecast that SMP imports will decline in 2025, driven by a combination of weak domestic demand, increased local production, and the availability of competitively priced domestic substitutes.
Dairy processors are increasingly relying on domestically produced SMP, WMP, and raw milk, reducing the need for imported SMP. Industry sources report a widening price gap between imported SMP and domestic dairy powders, further incentivizing the use of local alternatives. Domestic consumption of both SMP and WMP remains tepid, limiting the pace of stock turnover and suppressing restocking activity.
In the first quarter of 2025, SMP imports dropped modestly (see Chart 4), reflecting both supply-side substitution and demand-side weakness. Despite a projected seasonal uptick in dairy demand during the second half of the year—driven by national holidays and school reopening—this is unlikely to offset the weak import performance in the first half. As a result, full-year SMP imports are forecast to decline on a year-over-year basis.
Chart 3. China: SMP Imports
Source: Trade Data Monitor, LLC
Nonetheless, imported SMP will continue to serve a niche market for premium and specialty applications, such as infant formula and functional foods. New Zealand remains China's dominant SMP supplier, accounting for nearly 70 percent of imports in the first three months of 2025, followed by Australia. Although SMP imports are estimated to decline in 2025, the projected import volume in this report is higher than the forecast made in Post's last annual report, primarily due to stronger demand from the infant formula sector.
CHEESE
Post has revised its forecast and now expects China's cheese imports to increase moderately in 2025, supported by continued growth in domestic consumption, particularly from the foodservice sector. Early trade data from January to March 2025 indicates a year-on-year rise in cheese import volumes (see Chart 4), reflecting renewed confidence among importers and strengthening market demand.
Chart 4. China: Imports of Cheese
Source: Trade Data Monitor, LLC
The food service sector remains the primary driver of import demand. Stable demand from pizza chains, Western-style restaurants, and quick-service operators, coupled with innovation in fusion and regional cuisine, is expected to sustain commercial cheese usage. Retail cheese consumption, although facing challenges, also supports import demand in specific segments, such as adult-oriented cheese snacks, processed cheese for home cooking, and baking applications.
The cheese import market remains concentrated, with New Zealand continuing as China's dominant supplier, followed by Australia. Imports from the United States, which historically ranked third, are forecast to decline sharply in 2025 due to retaliatory tariffs imposed by China's Government on U.S. dairy products. In 2024, China's cheese imports from the United States declined partially due to a major food service group's decision to scale back usage of U.S. cheese in favor of more stable and competitively priced alternatives. Despite this decline, the relatively small share of U.S. cheese in China’s total import volume limits the broader market impact.
Some importers anticipate increased opportunities in retail channels, driven by heightened health awareness among consumers and the growing appeal of established foreign cheese brands. Effective brand promotion over recent years has helped select imported products gain traction in China's retail market. These efforts, combined with evolving consumer preferences for high-protein and convenient cheese snacks, are contributing to a broader based demand profile.
Overall, Post expects China's cheese imports to grow in 2025, underpinned by robust foodservice demand and selected gains in retail categories, despite shifts in supplier composition and continued trade tensions with the United States.
BUTTER
Post forecasts China's butter imports to grow quickly in 2025. The new estimate indicates a sizable increase compared to the forecast in Post's last annual report, driven by expanding demand from the baking and food service sectors. Although domestic production continues to rise, imported butter remains well-received in the market due to quality differentiation and brand preference, especially in high-end and specialty applications. In the first quarter of 2025, butter imports continued to increase (see Chart 5), underscoring solid underlying market capacity and sustained commercial interest.
Chart 5. China: Imports of Butter
Source: Trade Data Monitor, LLC
New Zealand continues to dominate China's butter import market in 2025. Industry sources indicate that additional supply from New Zealand is expected in later 2025, as a major dairy processor plans to begin exporting butter to China. This expansion reflects improved global returns on butter and SMP and further solidifies New Zealand's role as a primary supplier.
Butter import volumes increased sharply during the first quarter of 2025, driven in part by short-term purchasing behavior, as importers sought to secure supply ahead of anticipated price increases. Seasonal demand from restaurants, cafés, and dessert chains also contributed to early growth. However, Post assesses this early surge as temporary, with full-year import growth expected to normalize at a more moderate pace.
WHEY AND WHEY PRODUCTS
Post forecasts that China's whey imports will decline in 2025, primarily due to fluctuations in tariffs on U.S.-origin products. Although demand in both the food and feed sectors remains strong, importer concerns over retaliatory tariffs continue to limit the competitiveness of U.S. whey, which previously accounted for approximately half of China’s total imports. Some buyers have shifted sourcing to Eastern European suppliers; however, these alternative suppliers lack sufficient capacity to fully replace U.S. volumes.
Whey import volumes rose sharply during the first three months of 2025 (see Chart 6), driven by front-loaded purchases and seasonal feed demand. Nonetheless, Post maintains its full-year forecast for a decline in total whey imports, as ongoing tariff uncertainty is expected to weigh on the market for the remainder of the year.
Chart 6. China: Imports of Whey and Modified Whey Products
Source: Trade Data Monitor, LLC
China's domestic whey production remains limited. A recent investment by a major dairy processor established a demineralized whey powder production line with a designed annual capacity of 6,000 metric tons (MT). While this represents a positive step toward localizing production, the scale remains insufficient to meaningfully reduce import dependence in the near term. China's whey processing industry faces multiple constraints, including reliance on imported core processing equipment and low technological self-sufficiency. Industry sources indicate, unlike major global producers that generate whey powder from cheese-making byproducts, most Chinese manufacturers produce whey from fresh milk, resulting in different physical properties, such as solubility, and limiting compatibility with international product specifications. In short, China's demand for whey to feed the world’s largest swine herd far outweighs domestic cheese consumption and production.
Demand-side fundamentals remain strong. In the feed sector, moderate growth is expected due to a recovery in piglet inventories, as whey powder remains an inelastic component of young animal feed. In the food sector, applications in infant formula, dairy beverages, and sports nutrition continue to expand.
Notably, whey protein concentrate (WPC) is already in use domestically, although relevant national standards are still under development. For infant formula, whey is especially critical. First-stage formula typically contains up to one-third whey powder by weight. This high formulation demand further underscores the strategic importance of a stable supply.
Government policies, such as childcare subsidies introduced in early 2025, are intended to boost household consumption and may provide indirect support to dairy demand, including whey-based products. However, Post believes that strong demand will not be sufficient to offset structural supply-side constraints. Import tariffs and price volatility remain major risks. During previous tariff rounds, importers and U.S. exporters jointly absorbed tariff costs to maintain the flow of U.S. whey into China—a practice that may be less sustainable at current rates.
Given its essential role in livestock nutrition and infant nutrition manufacturing, China's whey market will remain heavily reliant on imports. Without substantial improvements in domestic production capacity and processing technology, further restrictions on U.S. supply or global price increases could place significant pressure on China's livestock and dairy processing sectors in 2025 and beyond.
Source: USDA
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