Brazilian dairy industry targets opportunities in the Chinese market

One year after exporting dairy for the first time to China, the Brazilian company CCGL received a visit from its partners in Asia. Due to unfavorable pricing, new deals were not closed. Still, companies kept constant contact throughout 2022 with an eye on the future.

That is understandable. Despite being on the other side of the world and close to the world’s largest exporter of dairy products (New Zealand), China is expected to increase imports by 80% between 2021 and 2031, the year in which purchases could reach 358 million tonnes (milk equivalent). The data came directly from the Chinese government and was curated by InvestSP, which promotes bilateral trade.

Brazilian exporters believe that Latin American countries may benefit from business opportunities this decade as Chinese demand increases, as there is a maximum volume New Zealanders can produce.

According to José Mário Antunes, COO of InvestSP, the increase in dairy consumption in China results from population growth and an adjustment to the local diet as per Beijing’s recommendation.

The task of gaining space in the Chinese market is difficult, as it requires investments and patience. Still, CCGL has committed to it right away. “When market conditions turned earlier in the year [i.e., prices in Brazi went up], we got to the point of calling off a shipment of 20 containers. We did this willingly to maintain a good relationship,” said Caio Vianna, president of CCGL.

The Brazilian cooperative sent two “small” batches of powdered milk to the Chinese market a year ago. The volume and value were not disclosed. Processors that make derivatives in general, such as cheeses, yogurts, and even sausages, bought the product.

According to Vianna, the buyers weren’t familiar with Brazilian dairy. According to Vianna, buyers still did not know about the Brazilian product. “They really liked it,” he said. “But selling to China requires not thinking only about immediate profit. CCGL knows that it will have to invest money, time, and, sometimes, even lose something” (profit). It takes effort, but if you want to gain a market, you”got to invest.”

In the view of exporters from Rio Grande do Sul, it will be possible for Brazil and its neighbors Argentina and Uruguay – two milk suppliers with solid reputations in the international market – to gain space in China over the decade because New Zealand alone will not be able to meet the increased demand in China.

Vianna believes that the New Zealanders’ ability to expand their offer is limited because the country uses grazing but not grains to feed the herds. Based on these characteristics, he believes farms will be unable to increase volumes by “30% or even to double it” to meet a much higher demand.

However, after New Zealand, the European Union, and Australia are the largest dairy suppliers to China, both of which are important global suppliers and are likely to compete for space. As a result, opportunities for Brazilians will arise in “in pockets” as Asian demand – Vietnam and Indonesia combined – increases, raising international prices.

Brazilian dairy products, like those from Europe and America, must pay a 10% tariff to enter China. In this regard, Australian and New Zealand exporters have advantages. For example, New Zealand products are exempt from paying this fee for 300,000 tonnes, and the quota will be reduced in 2024, and the country’s dairy products will enter China free of charge. Only bilateral agreements will be able to overcome this type of barrier.

The logistical costs created by the distance between China and Brazil are not a problem. “Negotiating with the Chinese demonstrated that, contrary to my expectations, freight is not a factor that affects our competitiveness,” Vianna said.

Given the challenges, milk may be the last of all Brazilian agricultural products to achieve a high export status, admits Vianna. However, he remains optimistic that the country can become an exporter and establish itself as a supplier to China. “A decade ago, Brazil did not export a kilo of beef to China; today, China is the primary destination for slaughterhouses,” he says.

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/agronegocios/noticia/2022/11/29/laticinios-miram-oportunidades-no-mercado-chines.ghtml

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