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China inks deal to allow dairy imports from Brazil

2019-08-12 13:55 Monday


Chinese officials signed an agreement last month to authorize imports from a select group of 24 dairy facilities in Brazil.

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The agreement signals the first time in 12 years that Brazilian dairy firms have been allowed to import their products into the Chinese market, which could lead to a dramatic boost in domestic exports such as butter and cheeses.

The deal was announced by Brazil's Agriculture, Livestock and Supply Minister Tereza Cristina on July 23. She said: “Brazil is a major producer and China is the largest importer in the world. Brazil produces 600,000 tons of milk, but China imports 800,000 tons. That is 200,000 tons more than we produce”.

The details of the plan were first agreed with China in 2007, but at that time no Brazilian factories were qualified to meet the necessary conditions.

Whilst on her trip to China in May, this was one of the minister's main priorities. Just beforehand, she had sent the list of recommended factories.

China went on to authorize these facilities to export non-fluid products including condensed milk, cheese, butter, and powdered milk. Shipments are expected to start as early as this month.

There are currently 1.2m small dairy farmers in Brazil. Industry group Viva Lácteos said that Brazil could expect around US$ 4.5 million in annual sales to China in the next two year as lasting commercial relationships take time to build up.

Head of Viva Lácteos Marcelo Martins commented that the move would provide a welcome boost to the sector, which plans to focus on cheese exports. This sector is where the competitive edge is strongest.

“Brazilian companies will make sales in cheese a priority. There is no way we can sell powdered milk, a commodity,” he remarked.

Dairy companies in Brazil are eager to return their focus to exports, after more than a decade's absence from China to cater to the domestic market, which grew by 4 percent annually from 2008 to 2014, Martins said.

“These authorizations are a decisive step to create demand for Brazilian dairy products, and nothing is better than the opening of the Chinese market,” he said. “But we have got homework to do.”

Brazil's unreliable power grid, which is vital to keep and run any profitable dairy operation, poses a challenge to prospective exporters, along with freight costs, Martins said.

Chinese consumers are not currently used to buying a lot of dairy products, but the culture has been touted as ready for a change.

A large portion of China's population is lactose intolerant, although marketing campaigns pushing dairy as part of a healthy diet have helped to develop a sizeable market in the country.

Imports dominate China's dairy market with New Zealand accounting for 51 percent of powdered milk from abroad, which totaled around 800,000 tons last year.

Brazil will likely face stiff competition from closer suppliers. On the other hand, China already imports 110,000 tons of cheese a year, with annual growth of 13 percent, according to Martins.

Last year, Brazil's total dairy exports were US$ 58.2m, with Russia, Argentina and Chile among the main buyers, according to data from Viva Lácteos.

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