RequiredReport:Required-PublicDistributionDate:November21,2025

ReportNumber:CH2025-0218

ReportName:DairyandProductsAnnual

Country:China-People'sRepublicof

Post:Beijing

ReportCategory:DairyandProducts

PreparedBy:FASChinaStaffandJadonMarianetti

ApprovedBy:EricMullisReportHighlights:

China'sdairymarketiscurrentlysaturatedwithexcessfluidmilk,drivingfarmgatepricesdownsincemid-2022.Whileoverallmilkoutputisforecasttoslightlydeclinein2025assmallerfarmsexitthemarket,largeprocessorsareinvestingincheese,butter,andfunctionalpowdersto

capturehigher-valuesegments.Postexpectsdemandfromthefeedandinfant-formulasectors

willkeepwheyimportsfirmin2026,whilebroaderadoptionofcheeseandbutterinrestaurants,bakeries,andtea/coffeechainsinlower-tiercitieswillsustainmodestimportgrowth.

THISREPORTCONTAINSASSESSMENTSOFCOMMODITYANDTRADEISSUESMADEBYUSDASTAFFANDNOTNECESSARILYSTATEMENTSOFOFFICIALU.S.GOVERNMENTPOLICY

2

EXECUTIVESUMMARY

TheforecastsandrevisedestimatesprovidedinthisreportareissuedbyFASChinaandarenotofficialUSDAdata.

FASChinaprovidesthisreportingandanalysisasaservicetoU.S.farmers,ranchers,rural

communities,andagribusinessesinsupportofaworldwideagriculturalinformationsystemandalevelplayingfieldforU.S.agriculture.

FluidMilk:Postforecastsproductiontoremainbroadlystablein2026withimportsdecliningslightly.DomesticproductionissufficientforUHTdemand,andpasteurizedmilkremains

locallysourced.

WholeMilkPowder(WMP):PostforecastsWMPproductiontodeclineslightlyin2026as

manufacturersshifttohigher-marginproducts.ReduceduseinUHT-reconstitutionduetothe

amendedsterilized-milkstandardwilldriveconsumptionmodestlylower.Postforecastsimportstoremainstable,primarilyservingspecification-drivenformulaandotherprocessingneeds.

SkimMilkPowder(SMP):PostforecastsaslightincreaseinSMPproductionin2026onbetterbutter-plus-skimeconomicsandmodestexpansionofmilkfatprograms.Specification-driven

infantformulademandwillpushupconsumption.Postforecastsforimportstoremainbroadlystable.

Cheese:Postexpectsproductiontorisegraduallyasnewcapacitycomesonline.Foodservice

expansionandwideradoptioninrestaurants,bakeries,andtea/coffeechainswilldrivemodestlyhighercheeseconsumptionin2026,withimportsslightlyincreasing.

Butter:Postforecastsbutterproductiontoincreaseslightlyin2026onimprovedmilkfatreturnsandsteadierfoodserviceprograms.Restaurantandbakerychannelsexpandingintolower-tier

citieswillhelpfuelamodestriseinconsumption.Postforecastsimportstoincreaseslightly.

WheyandWheyProducts:Postexpectswheyimportstoremainstrongin2026onstablefeed-gradedemandforpigletandnurserydietsandongoingfooduses,notablyinfantformula.

3

FLUIDMILK

Table1.China:Production,Supply,andDistributionforFluidMilk

Dairy,Milk,Fluid

MarketYearBegins

China

2024

2025

2026

Jan2024

Jan2025

Jan2026

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

CowsInMilk(1,000HEAD)

6,380

6,380

6,340

6,340

0

6,320

CowsMilkProduction(1,000MT)

40,790

40,790

40,600

40,600

0

40,600

OtherMilkProduction(1,000MT)

840

840

900

900

0

910

TotalProduction(1,000MT)

41,630

41,630

41,500

41,500

0

41,510

OtherImports(1,000MT)

705

705

680

670

0

660

TotalImports(1,000MT)

705

705

680

670

0

660

TotalSupply(1,000MT)

42,335

42,335

42,180

42,170

0

42,170

OtherExports(1,000MT)

30

30

32

35

0

40

TotalExports(1,000MT)

30

30

32

35

0

40

FluidUseDom.Cons.(1,000MT)

15,700

15,700

15,600

15,587

0

15,700

FactoryUseCons.(1,000MT)

26,605

26,605

26,548

26,548

0

26,430

FeedUseDom.Cons.(1,000MT)

0

0

0

0

0

0

TotalDom.Cons.(1,000MT)

42,305

42,305

42,148

42,135

0

42,130

TotalDistribution(1,000MT)

42,335

42,335

42,180

42,170

0

42,170

OFFICIALDATACANBEACCESSEDAT:PSDOnlineAdvancedQuery

Note:NotOfficialUSDAData

PRODUCTION

PostforecaststhatChina’sfluidmilkproductionwillremainstablein2026.Milkpriceshave

declinedcontinuouslysince2022(seeChart1),leavingmanyfarmsunprofitable,particularly

smallerindependentoperations.Sourcesindicatemostsmall-scalefarmswithfewerthan1,000headhaveexitedthemarketorhavebeenacquiredbylargeroperatorsthroughconsolidation.

Suchconsolidationtypicallytransferscattleratherthanliquidatingthemandthereforedoesnotdirectlyreducetotalinventories,leavinglimitedroomforfurtherreductionsin2026.The

remaininglargefarms,manyofwhicharefinanciallysupportedbyverticallyintegrateddairy

processors,areexpectedtomaintainstableherdsizesdespiteweakprices.Industrydataindicatethatfarmswithover1,000headsnowaccountformorethan68percentofproductionin2025,upmorethan2percentfromayearearlier,underscoringtherelianceoflarge-scaleoperations.

4

Chart1.China:AverageRawMilkFarmGatePrices1

RMB/KG

4.604.404.204.003.803.603.403.20

3.00

Source:MARA

Governmentsupportremainsanimportantstabilizingfactor.Programssuchastargetedsubsidies,technicaldemonstrations,andgrasslandconservationpaymentscontinuetoprovideincentives

forproduction.Despitegovernmentsupportandstabilizationamonglarge-scalefarms,the

nationaldairyherdwilllikelydeclinefurtherin2026,thoughataslowerratethaninrecentyears.Whilesmallfarmscontinuetoexit,ongoingimprovementsinper-cowyieldswilloffsetherd

contraction,keepingmilkoutputsteady.

TheNationalBureauofStatistics(NBS)reportedthatChina’stotalcattleherdstoodat100.5

millionheadattheendof2024,down4.4percentyear-on-year.Bytheendofthesecondquarterof2025,inventoriesfellfurtherto99.9millionhead,a2.1percentyear-on-yeardecline,showingamoderatecontraction.Althoughthenationalcattleherdmaycontinuetocontract,regional

trendsvarysignificantly.Inthefirsthalfof2025,traditionalproductionhubssuchasHebeipostedslightdeclinesduetotighterenvironmentalregulationsandreducedsmallholder

participation,whileemergingregionssuchasGansuregisteredrapidexpansion,partiallyoffsettingdeclineselsewhere.

Inthelongerterm,restrictionsonimporteddairygenetics,stemmingfromthesuspensionof

frozensemenimportsfromtheUnitedStatesandEurope,poseriskstoproductivity.However,theimpactwilllikelyonlymaterializeoverthenextfewyearsandisnotexpectedtoaffect2026productionlevels.

1Theaveragepricefromthe10leadingrawmilkproductionprovincesandautonomousregionsofHebei,Shanxi,InnerMongolia,Liaoning,Heilongjiang,Shandong,Henan,Shaanxi,Ningxia,andXinjiang.Industrysources

indicatefarmgatepricesrefertothepricedairyprocessorspaytodairyfarmers.However,asmentionedinthisreport,becausedairyfarmerscannotsellalltheirmilktodairyprocessors,sometimestheymustselltodealersatextremelylowprices.Farmgatepricesnormallydonotincludepricespaidtodealers.

5

CONSUMPTION

PostforecastsChina’sfluidmilkconsumptiontoremainstablein2026.Structuralshiftsareunderwayasconsumersarefindingnewwaystoconsumefluidmilk,whileUHTmilkwillcontinuetodominatethecategory.

Expandingbeveragechannelsandrisingdemandforhigh-endpasteurizedproductsarethe

primarydriversforgrowthinfluidmilkuse,whileweakconsumerconfidenceremainsthekeyconstraintforhighergrowth.Fluidmilkisgainingusageinnewoccasionssuchasafternoontea,coffee,teadrinks,andbakerygoods.Sourcesindicatethatsomelargebeverageproducersare

makingliquidmilkanimportantingredient,providinganewsourceofincrementaldemand.

Consumerhealthawarenessandashifttowardpremiumdairyproductsarealsosupporting

pasteurizedmilkconsumption.Industrysourcesreportedthatsalesofpasteurizedproductsgrewmorethan8percentinthefirsthalfof2025.Nevertheless,UHTmilkcontinuestoaccountfor

themajorityoftheliquidmilkmarket,meaningthatgrowthinpasteurizedmilkconsumption

willnottranslateintoasubstantialincreaseinoverallfluidmilkuse.Infirst-tiercitiesandhigh-incomeregions,demandforpremiumpasteurizedproductsisrisingrapidly,whileincentralandwesternprovincesconsumptiongrowthisslower.

Postexpectscheeseandbutterproductiontocontinuerisingin2026,reflectingagradual

diversificationoffluidmilk’suseinthedairyprocessingsector.However,bothcategories

remainsmallinChina’soveralldairymarketandcontributeonlylimitedadditionaldemandforfluidmilk.Asaresult,dairyprocessorswillstillprocessalargeshareoffluidmilkintomilk

powder.

TRADE

PostexpectsChina’sfluidmilkimportstodeclineslightlyin2026.WhileUHTproductsarethelargestshareofimports,domesticcapacityalreadyprovidesabundantsupply.Atthesametime,expandingconsumerdemandforpasteurizedmilkreliesonshort,localizedsupplychains,

limitingthedemandforimportedfluidmilk.China’sfluidmilkimportspeakedin2021andhavefallensteadilysince.Importvolumesinthefirsteightmonthsof2025continuedtofall

moderately(seeChart2),indicatingthatthemarketcontinuestoadjusttohigherlevelsofdomesticsubstitution.Thistrajectoryislikelytoextendinto2026.

6

Chart2.China:ImportsofFluidMilk

1,400

1,200

1,000MT

1,000

800

600

400

200

0

2017

2018

2019

2020

2021

2022

2023

202401/202401/2025

--

08/202408/2025

Source:TradeDataMonitor,LLC

NewZealandremainsthelargestsupplieroffluidmilktoChina,benefitingfromduty-free

accessunderthebilateralfreetradeagreement.ImportsfromGermany,France,andPoland

remainamongthetopbuthavetrendedlowerinrecentyears.Lookingahead,tighter

environmentalconstraintsonEUlivestockproductionarelikelytokeepEUdairypriceselevated;combinedwithcomparativelyhigheroceanfreightcosts,China’sfluid-milkimportsfrom

Europemaycontinuetocontract.

7

WHOLEMILKPOWDER

Table2.China:Production,Supply,andDistributionforWholeMilkPowder

Dairy,DryWholeMilkPowderMarketYearBegins

China

2024

2025

2026

Jan2024

Jan2025

Jan2026

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

NewPost

BeginningStocks(1,000MT)

175

175

145

145

0

120

Production(1,000MT)

1,170

1,170

1,140

1,140

0

1,120

OtherImports(1,000MT)

409

409

420

420

0

420

TotalImports(1,000MT)

409

409

420

420

0

420

TotalSupply(1,000MT)

1,754

1,754

1,705

1,705

0

1,660

OtherExports(1,000MT)

21

21

50

50

0

55

TotalExports(1,000MT)

21

21

50

50

0

55

HumanDom.

Consumption(1,000MT)

1,588

1,588

1,535

1,535

0

1,495

OtherUse,Losses(1,000MT)

0

0

0

0

0

0

TotalDom.Cons.(1,000MT)

1,588

1,588

1,535

1,535

0

1,495

TotalUse(1,000MT)

1,609

1,609

1,585

1,585

0

1,550

EndingStocks(1,000MT)

145

145

120

120

0

110

TotalDistribution(1,000MT)

1,754

1,754

1,705

1,705

0

1,660

(1,000MT)

OFFICIALDATACANBEACCESSEDAT:PSDOnlineAdvancedQuery

Note:NotOfficialUSDAData

PRODUCTION

PostforecastsWMPproductiontodeclineslightlyin2026asprocessorsplantoallocatemore

milktoproductswithbettermargins,relyinglessonWMPasaroutineoutlet.Processors

typicallymakeWMPwhenfluidmilksupplyexceedsnear-termdemand,usingpowderasawaytostoreandbalancemilkuseovertime.Inthecurrentmilkpriceenvironment,however,WMPoftenunderperformsonacost-to-pricebasis.Processorsscalebackpowderproductionwhen

theycanplacemilkdirectlyintodairyproducts.Managersdescribedtighterthresholdsfor

addingtoWMPvolumesratherthanstockbuildingthroughout2025andexpecttheapproachtocontinuein2026.

Product-mixeconomicsreinforcethesofterWMPprofile.Strongermilkfatreturnsencourage

creamseparationandsupportabutter-plus-skimstrategythatgenerallydeliversbettereconomicperformancethanmakingWMPonthesamemilkbase.Atthesametime,steadydevelopmentofcream/butterandcheeselines,togetherwithexpandingliquidapplicationsinbeverageand

foodservicechannels,areconsumingmoremilk.

Governmentpolicyremainsastabilizerratherthanacatalystforexpansion.InJuly2025,theMinistryofAgricultureandRuralAffairs(MARA),togetherwithsixotheragencies,issuedanoticethatoutlinedeightactionstostabilizethedairyindustry,includingpromotingcost-

8

reductionandefficiencyimprovements,enhancingfinancialsupport,strengtheningbreeding

programs,encouragingdeepprocessingandhigher-valueproductdevelopment,andadvancing

integrationofmilkproduction,processing,andmarketing.Importantly,thedocumentauthorizedprovincialgovernmentstoapplylocalizedtools(e.g.,WMPproductionsubsidies,incremental

milk-procurementincentives,andmerger-and-restructuringsupport)tomanageseasonal

imbalancesinrawmilksupplythroughmarket-orientedmeasures.Implementation,however,

variesattheprovinciallevel.Forexample,sourcesindicateInnerMongoliaandHebeicontinuetoofferWMPproductionsubsidiestohelpprocessorskeepmilkpurchasesteadyduringseasonalpeaks.Heilongjiangprovidesincrementalprocurementsubsidiesthatpayprocessorsfor

purchasingadditionalrawmilkabovebaselinevolumes,whileNingxiaintroducesprogramsthatsupportlargerraw-milkpurchases.

CONSUMPTION

PostforecastsamoderatedeclineindomesticWMPconsumptionin2026.Somefoodservice

channelsfavorliquidmilkbasesandmilkfatoverpowders,andtherevisedsterilized-milk

standardreducespowder-basedreconstitutioninUHTmilk.However,WMP’sbroad

applicationsunderpinastablebaseofdemand,soanydeclinein2026isexpectedtobemodest.

WMPinChinaisusedwidelyinreconstitutedmilk,dairybeverages,andarangeofbakeryandprocessedfoods.Typicalapplicationsincludedrydairybeverageblends,ice-creammixes,

bakeryitems(bread,cakes,biscuits),confectionery,andsomefermentedproductslikeyogurt.Inmanyoftheserecipes,manufacturerscansubstitutebetweenWMPandskimmilkpowder(SMP)withintechnicallimits,selectingtheleast-cost,fit-for-purposeinput.Thisinterchangeability,

togetherwiththevarietyofenduses,providesastablebaseofannualWMPconsumptionevenwhenpricesorchannelpreferencesshift.

Processorsareincreasinglysubstitutingfresh(liquid)milkforWMPintheirformulations.

Productssuchasdairybeverages,bakeditems,andicecreamarethensuppliedtofoodservice

channels,includingnationalteaandcoffeechains,bakerychains,ice-creamshops,andquick-

servicedessertcounters.Whenfarmgatemilkpricesaremoderate,thetotalcostofliquidmilk

inputsbecomemoreaffordable.IndustrycontactsalsoreportthatcomparedtoWMP,liquidmilkandcreamdeliverbettertasteandtexture,andsupport“freshmilk”marketingclaims.Expandedcold-chainandcentralizedcommissarysystemsreducethelogisticaladvantagethatpowders

onceheld.

Implementationoftheamendednationalstandardforsterilizedmilk,effectiveSeptember16,

2025,requiresUHT“puremilk”tobeproducedonlyfromrawmilkandprohibitsreconstitutedmilk.Postexpectsprocessorstoadjustprocurementandformulas,accordingly,shiftingawayfromWMPusedforreconstitution.Asenforcementbroadens,WMPuseinUHTapplicationscoulddeclinein2026.

TRADE

PostforecastsforWMPimportstoremainstablein2026,whichhavestayedwithinanarrow

bandoverthepasttwoyears(seeChart3).Importswillcontinuetoservespecificformulasand

9

processingneedsratherthandriveoverallmarketgrowth.NewZealandcontinuestobethe

primarysupplier,withshipmentsarrivinginsteady,program-specificflows.Importvolumeswilllikelymovewithinanarrowbandthroughouttheyearasbuyersrespondtopricespreads,

exchangerates,andlogistics.

Chart3.China:ImportsofWMP

900

800

700

1,000MT

600

500

400

300

200

100

0

2017201820192020202120222023202401/202401/2025

--

08/202408/2025

Source:TradeDataMonitor,LLC

Domesticsubstitutionhaslargelyrunitscourse.Overthepastfewyears,lowdomesticprices

enabledbeverage,ice-cream,andbakerymanufacturerstoswitchfromimportedWMPto

domesticWMPorSMPwhereverprocessesallowed.SourcesindicatethatmostoftheprogramshavealreadymadetheswitchtodomesticallyproducedWMPorSMP,leavinglimitedroomforadditionalsubstitution;theremainingprogramstendtorequireconsistent,qualifiedforeign

powderthatisnoteasilyreplaced.Infantformula(suchaslater-stageproducts)andcertain

children’sformulasrequireconsistentfunctionalityandtightlycontrolledspecifications,and

buyersinthesecategoriesoftenremaintiedtoestablishedoverseassuppliers.Someindustrialprocessorsalsomaintainbrand-andperformance-lockedinputsthatarenotreadilyreplacedbydomesticpowder.Theseneedsaremodestinscalebutsteadythroughouttheyear,anchoringabaselineofimportdemand.

10

SKIMMILKPOWDER

Table3.China:Production,Supply,andDistributionforSkimMilkPowder

Dairy,Milk,NonfatDryMarketYearBegins

China

2024

2025

2026

Jan2024

Jan2025

Jan2026

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

BeginningStocks(1,000MT)

0

0

0

0

0

0

Production(1,000MT)

51

51

56

56

0

60

OtherImports(1,000MT)

229

229

230

230

0

230

TotalImports(1,000MT)

229

229

230

230

0

230

TotalSupply(1,000MT)

280

280

286

286

0

290

OtherExports(1,000MT)

2

2

6

10

0

10

TotalExports(1,000MT)

2

2

6

10

0

10

HumanDom.Cons.(1,000MT)

278

278

280

276

0

280

OtherUse,Losses(1,000MT)

0

0

0

0

0

0

TotalDom.Cons.(1,000MT)

278

278

280

276

0

280

TotalUse(1,000MT)

280

280

286

286

0

290

EndingStocks(1,000MT)

0

0

0

0

0

0

TotalDistribution(1,000MT)

280

280

286

286

0

290

(1,000MT)

OFFICIALDATACANBEACCESSEDAT:PSDOnlineAdvancedQuery

Note:NotOfficialUSDAData

PRODUCTION

PostforecastsSMPproductiontoincreaseslightlyin2026.Industryfeedbackindicatesthat

currentpricerelationshipsoftenfavorabutter-plus-SMPmakeoverWMP,soprocessorsplantodevoteabitmoremilktoskimstreamswithinroutineschedules.Expansiononthemilkfatside,risingdomesticbutteroutputandnewcreamprogramsservingbakeryandfoodservice,

reinforcesthisplanbypullingmorecreamandbutterfromthemilkpoolandgeneratingskimfordrying.Postviewsthisasanincrementalshiftratherthanastep-changebecausethesemilkfat

programsremainsmallrelativetoliquiddairy;consequently,theadditionalskimmilktheycreate,andtheresultingSMP,areinherentlylimited.Undertheseconditions,SMPoutputisexpectedtoedgehigherratherthansurge.

Postexpectsfluidmilkoutputin2026toholdroughlysteadyfollowingtheadjustmentsofthe

priortwoyears,givingplantsenoughrawmaterialtomaintainseparationandmanageskimmilkflows.Skimmilkistheimmediateco-productofcreamandbutterprograms;processorsusethisliquidskimmilktostandardizeandsupplylow-fatandskimdrinkingmilksandotherliquid

dairylines,soonlyaportionoftheskimmilkpoolisdriedintoSMP.ThisallocationkeepstheincreaseinSMPmodestevenasmilkfatlinesexpand.

11

CONSUMPTION

PostexpectsSMPconsumptiontoincreaseslightlyin2026throughspecification-drivendemandininfantformula.SMPisusedacrossreconstitutedandindustrialapplications,includingdairy

beverages,ice-creammixes,bakerymixesandpremixes,confectionery,fermenteddairybases,anddrybeverageblends.Inmanyoftheseproducts,SMPandWMParetechnically

interchangeable;formulatorsswitchbetweenthembasedonrelativeprices,processconstraints,anddesirednutritionprofiles.ProcessorsfavorSMPwheretheywanttotargetproteinwhile

managingfatindependently.

PostexpectsSMPconsumptiongrowthin2026tocomeprimarilyfromincreasedinfantformulaproduction.Infantformulaisthemostspecification-constrainedandstableoutlet.Stage1–2

formulasrelyontightlyspecifiedSMPtomeetfunctionalityandqualityrequirements.Post

expectsinfantformulaoutputtorisemodestlywithanincreasingbirthrateandnewfamily-

supportpoliciestakeeffect.AccordingtoNationalBureauofStatistics(NBS),Chinarecorded

9.54millionnewbornslastyear,anincreaseof520,000comparedwith2023.Thebirthratefor

2024reached6.77per1,000people,reflectinganincreaseof0.38perthousandfromthe

previousyear.Pro-consumptionmeasuresunderthe“SpecialActionPlantoBoost

Consumption,”jointlyissuedbytheGeneralOfficeoftheCPCCentralCommitteeandtheStateCouncilinMarch2025,includemorethan30policyitemstoraisehouseholddisposableincome,withspecificfocusonchildcaresubsidiesandmaternityserviceimprovements.InJuly2025,theStateCouncilannouncedanannualnationwidechildcaresubsidyarrangementofRMB3,600

(approximately$5072)perchildaged0–3years.Takentogether,thesefactorscouldsupportamodestgrowthininfantformulaproductionand,inturn,higherSMPuse.

TRADE

PostforecastsSMPimportstoremainstablein2026.Afterpeakingin2021,importsfellto229thousandmetrictons(MT)in2024andheldnearthatlevelin2025(seeChart4).Supplyhas

becomemoreconcentrated,withNewZealandremainingtheprimarysupplierwithregularlycontractedshipments.ShipmentsfromAustralia,theUnitedStates,Belarus,andseveralEUmemberscontinuetodecline.

Stable“must-have”useskeepimportsfromfallingfurther.IndustrycontactsindicateStage1–2infantformulareliesontightlyspecifiedSMP,typicallyfromestablishedoverseassuppliers,to

meetfunctionalityandconsistencyrequirements.Thesespecificationschangeslowlyandsupportsteadyimportdemandevenwhenoveralldairyusesoftens.

2Theexchangerateusedinthisreportis1USD=7.1RMB.

12

Chart4.China:SMPImports

450

400

350

1,000MT

300

250

200

150

100

50

0

2017201820192020202120222023202401/202401/2025

--

08/202408/2025

Source:TradeDataMonitor,LLC

Furtherdomesticsubstitutionofferslimitedroomtoreduceimports.Overthepastfewyears,

manufacturershavealreadyreplacedimportedpowderwithdomesticSMPorWMPwherever

formulationsandprocessesallowed.Insectorslikebeverages,icecream,andbakery,firms

switchbetweenSMPandWMPwithintechnicallimitsandusedomesticpowderswhenthey

meettheprice-and-performancebrief.Withmostfeasiblesubstitutionsalreadyinplaceby2025,remainingprogramsarehardertoreplace,andimportstendtoholdratherthandecline.

Newbusinessinteaandcoffeechainsandinbakeryleanstowardliquidmilk(including

concentratedbases),cream,andcheeseingredients,soSMPisnottheprimarybeneficiaryofmenuexpansion.Thisshiftsupportsoveralldairyusebutaddslittleincrementalpullfor

importedSMP.

13

CHEESE

Table4.China:Production,Supply,andDistributionforCheese

Dairy,Cheese

MarketYearBeginsChina

2024

2025

2026

Jan2024

Jan2025

Jan2026

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

BeginningStocks(1,000MT)

0

0

0

0

0

0

Production(1,000MT)

28

28

30

30

0

32

OtherImports(1,000MT)

173

173

185

190

0

192

TotalImports(1,000MT)

173

173

185

190

0

192

TotalSupply(1,000MT)

201

201

215

220

0

224

OtherExports(1,000MT)

1

1

1

1

0

1

TotalExports(1,000MT)

1

1

1

1

0

1

HumanDom.Cons.(1,000MT)

200

200

214

219

0

223

OtherUse,Losses(1,000MT)

0

0

0

0

0

0

TotalDom.Cons.(1,000MT)

200

200

214

219

0

223

TotalUse(1,000MT)

201

201

215

220

0

224

EndingStocks(1,000MT)

0

0

0

0

0

0

TotalDistribution(1,000MT)

201

201

215

220

0

224

(1,000MT)

OFFICIALDATACANBEACCESSEDAT:PSDOnlineAdvancedQuery

Note:NotOfficialUSDAData

PRODUCTION

PostforecastsChina’scheeseproductiontogrowmodestlyin2026withexpansioninthe

foodservicesectorasthemaindriver.Buyersthatoncereliedentirelyonimportsaresourcing

moredomesticallybecauseofshorterleadtimes,fasterreplenishment,on-sitesupport,and

improvedreliability.Leadingdomesticbrandsreportstrongerbusiness-to-businesssales,and

routineordersnowincludealargershareofdomesticcheese.Industrycontactshavealso

reportedthatdomesticrawmilkpriceshavestayedcomparativelylow,improvingtheeconomicsofmakingcheeseinChinaandreinforcingtheshifttowarddomesticsourcing.

Severalprovincesarebuildinghigher-valueprocessingplatformsthatincludecheeselines.Forexample,inNingxia’sindustrialpark,anintegratedprocessingproject’sfirstphaseincludesa

plannedoutputin2026offivelinesthatcanprocessapproximately800MTofmilkperdayformultipleproducts,liquidmilk,cream,butter/anhydrousbutter,andcheese.AsecondphasewillopeninJanuary2026andaddsa700-MT-per-daydesignthatincludespowderandcaseinlines.InHubei,aseparateintegratedprojectwithaplannedcapacity3of300MTperdaywillproducepasteurizedmilk,yogurt,andcheese.

3Inbothcases,thecapacityfiguresrefertototalraw-milkintakeacrossseveralproductlines;actualcheeseoutputwilldependonhowprocessorsallocatemilkacrossthoselines.

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Growthremainsmoderateratherthanrapid.Thesectorisstilltransitioningfromaliquid-milk

basetowardhigher-valueprocessing,andproducersnotecapabilitygapswithmatureoverseas

industries.Mostnewcheeseoutputtargetsmainstream,easytoproducestylesforfoodservice

ratherthanagedorspecialtycheeses,whichlimitspotentialgrowth.Lookingahead,anyincreaseinraw-milkpriceswouldalsonarrowmargins,reinforcingasteady,incrementalgrowthprofilein2026.

CONSUMPTION

Postforecastscheeseconsumptiontogrowmodestlyin2026.Restaurants,bakeries,and

tea/coffeechainscontinuetoaddmozzarella,processedslices,andcreamcheeseitemstomenus,andleadingsuppliersreportstrongerbusiness-to-businessmomentum.Inthefirsthalfof2025,aleadingChinesecheeseprocessorreportedrevenueofRMB2.57billion(approximately$362

million),anincreaseof8percentyear-over-year.Cheeseaccountedforabout84percentofthecompany’stotalrevenue.Salesofingredientproductstoindustrialcustomers,mainlysupplyingfoodservicechannels,rose36percentyear-on-year,