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The mainland's fresh milk production has been in surplus for a period of time, and the consumption of dairy products has recovered at a low level, but the dependence on cheese, whey powder, butter and other imports is high. With the rapid rise of the cheese market in recent years, whey powder, as a by-product of industrially produced cheese and casein, has attracted the attention of many dairy companies, and has also attracted much attention as an important raw material for infant formula. At the same time, the relevant government departments have also paid great attention to it and given relevant guidance and support!
1
On September 13, 2023, the Ministry of Industry and Information Technology, the National Health Commission, and the State Administration for Market Regulation jointly issued a notice to deploy and carry out the task of improving the supply capacity of desalted whey products. The purpose is to promote the large-scale production of demineralized whey liquid (powder) with formulated raw materials and market application in downstream products. After nearly half a year of work, 10 applicants and a number of participating units were finally shortlisted, and the task was divided into five major technical routes for implementation. (Details are shown in the table below)
Table: List of shortlisted units for the task of improving the supply capacity of demineralized whey products (public draft)
Source: Ministry of Industry and Information Technology
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Why develop local demineralized whey production?
In recent years, the General Office of the State Council, the Ministry of Agriculture and Rural Affairs, the Ministry of Industry and Information Technology and other departments have supported the development of dry dairy products such as cheese, whey powder, and butter, aiming to break the dependence on imports and optimize the structure of the domestic dairy industry. Song Kungang [1], Honorary Chairman of the China National Committee of the International Dairy Federation [1], said that the mainland dairy market is in a contradiction of structural surplus and shortage. At present, there are a variety of liquid milk products, which are relatively saturated, but almost all of the raw milk powder, cheese, cream, whey products, and milk protein products rely on imports.
The annual demand for demineralized whey powder in mainland China is about 300,000 tons, of which the demand for D90 demineralized whey powder in infant formula is about 10-150,000 tons. Almost all of this demand comes from imports, and this dependence on the international market has caused domestic supply chain risks and great uncertainty, and supply and prices are subject to others, burying hidden dangers for business operations. Therefore, we have adopted such a unique approach, led by leading enterprises, to overcome technical difficulties and develop the local demineralized whey powder industry.
3
Producing demineralized whey at scale is challenging
However, judging from the current domestic situation, the large-scale production of demineralized whey powder has a long way to go!
On the one hand, the consumption of raw materials is too large and the cost is too high. If domestic demand is met, about 8 million tons of fresh milk will be needed, and in 2023, the mainland's milk output will be 41.97 million tons (Statistics Bureau), and the output of goat milk will be about 1.45 million tons, equivalent to about 18% of fresh milk consumption. In addition, to achieve a reasonable scale of whey powder spraying, the processing plant needs to maintain a daily processing capacity of about 300-350 tons of raw milk, which is equivalent to the milk production of 20,000 high-yielding dairy cows [2]. The demand for raw materials is large and the cost is high, rough calculation: the average price of fresh milk in 2023 is 3,850 yuan/ton (Egger Agriculture), the production of one ton of whey powder requires about 25 tons of raw milk, and the cost of raw materials is about 96,000 yuan, and the average price of cheese produced is 33,000 yuan/ton, and 2.5 tons of cheese can get 83,000 yuan of income. In contrast, the average price of whey imported from mainland China in 2023 will be US$1,302/ton, equivalent to about RMB 9,175/ton, and the price advantage of imported products is obvious. Therefore, some enterprises use imported sweet whey powder to reconstitution, desalt and dry in China to produce D90, which is relatively feasible, but it is also mainly used for their own production of infant formula.
Chart: Average import price of whey imported from China from 2016 to 2023 (yuan/ton)
Data source: public information, compiled by Dairy Online
On the other hand, foreign desalted whey products, as a by-product of cheese production, are widely used in dairy products and food processing, and have a stable production enterprise group and market consumption base. However, the related industries and terminal markets in mainland China need to be further developed and expanded. Theoretically, it is estimated that if about 300,000 tons of desalted whey powder are completely localized, then about 750,000 tons of cheese will be produced at the same time, and the annual consumption of cheese in mainland China will be about 300,000 tons in 2023, and the oversupply and demand will be serious. If imported cheese is localized, based on the mainland's 180,000 tons of cheese imports in 2023, more than 70,000 tons of demineralized whey products can be produced eventually. Therefore, we can believe that there is a long way to go for domestic demineralized whey products to replace imports, and in the process of replacing imported products with domestic cheese, it is feasible to gradually establish the large-scale production of demineralized whey products in the mainland, but the process is also relatively slow.
Chart: Changes and structure of cheese supply in China from 2014 to 2023
Data source: public information, compiled by Dairy Online
Third, although Yili, Feihe, Hongxing Meiling and other enterprises have the technology and equipment to produce demineralized whey, they have not yet achieved large-scale production and extensive application.
4
A step-by-step path to scale up demineralized whey
At present, domestic enterprises still have a certain price advantage and are profitable to import goat whey to reproduce demineralized whey powder, while it is difficult to make a profit and lack competitive advantage in the production of demineralized whey powder based on cow milk. In this context, relevant government departments and leading enterprises are still working hard to overcome difficulties and develop the industrialization of demineralized whey in line with the current situation in mainland China. From the perspective of five technical routes, two use milk as raw materials, two use goat's milk as raw materials, and one uses sweet whey as raw materials, from the source of raw materials and the product portfolio of the enterprise to layout.
For example, Microcolando combines its own advantages and industrial layout to develop original cheese and demineralized whey powder, which can not only solve the problem of dependence on raw material imports, but also extend the industrial chain and enrich the product structure. Feihe has built a demineralized whey production line, and the D90 demineralized whey products produced have been applied to its own infant products. Several other leading companies are also actively developing the R&D and production of demineralized whey products, and have made varying degrees of progress.
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With the start, it is also necessary for upstream milk sources to provide the cornerstone for development, and the terminal market to broaden the development space
The active participation of the government and leading enterprises has started the demineralized whey industry, but in order for enterprises to achieve profitability and form a truly benign large-scale production, other conditions are needed, first, the supply and quality of upstream raw milk must be guaranteed, and the price must be maintained at a reasonable level, and second, the end consumption is broken to stimulate the demand for demineralized whey products.
On the one hand, domestic raw milk can provide some raw materials, but considering the domestic dairy farming cost, resource consumption, environmental friendliness and sustainable development and other factors, the import of raw materials and the diversification of sources are more in line with the current development needs.
On the other hand, expand the end consumer market and stimulate product demand. First of all, the infant formula market, as the main terminal market for D90 and D70 whey products, will greatly affect the market size and profitability of high-end demineralized whey products. However, at present, the mainland infant formula industry has entered the stock era, and the growth of demand will mainly come from the substitution of domestic brands to international brands and the upgrading of product structure; followed by the field of food processing, D50 and D40 desalted whey powder can be widely used in baked goods, sports nutrition, health care products, and cold drink industries, which are still in the growth period and may contribute to the main growth rate in the future development of demineralized whey products.
From the perspective of the national level and the long-term development of the dairy industry, it is imperative to build a local demineralized whey production system!
Enterprises with the conditions for the production of original cheese start with fresh milk; capable consumer enterprises appropriately extend to the upstream to produce demineralized whey products with imported whey, and enterprises develop according to their own resources and characteristics, and the production of demineralized whey products is plugged in and embedded in other industries, as an important part of dairy product processing, waiting for the opportunity to move. After solving the problem of raw material supply and breaking the terminal market in the future, the front/back-end production line will be directly grafted on the existing basis to form a complete industrial chain.
Resources:
[1] Guo Tie. Breaking the dependence on imports, dairy enterprises increase the self-sufficiency of demineralized whey[N]. Beijing News, 2024-2-23
[2] Qin Shaocong. Why is there a large demand for whey powder imports from mainland China[N]. Farmer's Daily,2023-4-25(006).
[3] Notice of the Ministry of Industry and Information Technology on the unveiling of the task of improving the supply capacity of demineralized whey products
[4] Ministry of Industry and Information Technology, the task of improving the supply capacity of demineralized whey products was shortlisted for the announcement of the unveiling units
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