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Taiwan Dairy and Products Annual Report 2008

24 November 2008

USDA Foreign Agricultural Service

Imports of most dairy products declined in 2007 and 2008 due to high international prices, reports USDA, Foreign Agricultural Service. A link to the full report is also provided. The full report includes all the tabular data which we have omitted from this article.

Report Highlights

In 2007, China made significant progress in exporting to Taiwan on several items but these products faced import suspensions following the crises surrounding melamine tainted dairy products beginning in September 2008, which also resulted in a new, temporary test report requirement for imports from all sources in three categories: milk powder, infant formula, and creamers.

New Zealand was recently granted a waiver from the new melamine-free test report requirement after submitting safety and testing system documentation, with other supplier’s reportedly considering similar submissions to facilitate trade in the impacted categories.

New Zealand and Australia remain the key players in supplying dairy products to Taiwan. Owing to price and shelf-life constraints, U.S. fluid milk, milk powder and butter are not competitive and the market share is insignificant. U.S. dairy industry group’s marketing endeavors have focused on those products that are competitive in this market, like cheese, whey powder or lactose. U.S share of Taiwan’s cheese imports have been increasing.

Executive Summary

Production

Taiwan’s tropical and sub-tropical climate is not the best environment for dairy production. Other than fresh fluid milk, Taiwan produces no dairy products (powdered milk, cheese, whey, etc.) in commercial quantities.

In 2007, a total of 322,349 mt of cow’s milk was produced from 597 registered dairy farms. Production levels in 2008 will remain around 2007 levels but is forecast to increase slightly in 2009. Taiwan’s goat milk production totaled 17,774 mt in 2007. Production levels are expected to continue to decline in 2008 and 2009.

Taiwan’s dairy farmers struggled to combat global price hikes on feed like their counterparts elsewhere in the livestock industry. To help mitigate the high cost of feed, in mid 2007, the Taiwan agricultural authorities helped raise the purchase prices for raw milk paid by processing plants to farmers, by NT$3/kg. These prices, NT$18.24/kg for winter season (December to March); NT$25.73/kg for the summer season (June to September); and NT$23.73/kg for the warm season (April, May, October and November) remain unchanged in 2008. (Exchange rate was NT$32.85=US$1 in 2007; roughly NT$30.5=US$1 in the first 8 months of 2008.)

According to the Council of Agriculture (COA), one dairy cow generated NT$30,483 (US$928 equivalent) of income in 2007. This represents a 30 percent decline from 2006 levels largely due to the high cost of feed inputs. The high cost of feed caused some dairy operations to use inferior feed stock that resulted in lower milk output thus adding to the decline in income. Also depressing income were lower prices paid for spent cows and young steer. Milk production tends to be highest during the cooler winter months (October through March) while consumption patterns for fresh milk run in reverse, peaking in the summer months.

The melamine-contamination scandal in China during the fall of 2008 is having major repercussions in Taiwan generating heavy media coverage and impacted policies regarding local milk production, demand and imports. Findings of low-level melamine contamination in various products including international brands caused Taiwan consumers to fear imports especially those sourced from China and boosted demand for domestic milk resulting in calls by the domestic industry to expand the scale of production. However, a major hurdle for expansion of local production is the dependency on imports for almost all inputs, seedstock, feed, etc.

Consumption

There are 19 dairy processing plants in Taiwan, but three processors account for more than 70 percent of production of raw milk into consumer-ready fresh milk.

The COA reported a 47 kg per capita consumption of fluid milk, including reconstituted milk, in 2007. The 2007 data for other dairy products is not available yet but historical per capita consumption for milk powder would be about 4 kg and that for butter would be less than 1 kg.

The relatively expensive locally produced fresh milk is virtually all for direct consumer consumption, including some limited flavored milk and yogurt drinks. The only measurable processed dairy product is milk powder produced by one processing plant out of surplus milk during the low consumption winter period. Annual production of milk powder is estimated at 1,000 mt (out of 8,000 mt of raw milk) during the winter time. Demand of other dairy products is met by imports.

Taiwan’s dairy industry incurred a less profitable year in 2007 and witnessed rollercoaster changes in demand for fluid milk in 2008. During the beginning of 2008 consumption of domestically produced milk was low causing oversupply in fluid milk that in-tern caused the production of domestic milk powder to double from 1,000 to 2,000 mt spurring a government buy-out program that called for the culling of 2,000 dairy cows. However, because of concerns over melamine tainted milk products the demand and prices for locally produced milk increased. With increased demand for domestic fluid milk no milk powder production is expected in 2009.

Trade

Overall Dairy Products

New Zealand and Australia remain the key players in supplying dairy products to Taiwan. Owing to price and shelf-life constraints, U.S. fluid milk, milk powder, and butter are not competitive and the market share is insignificant. The U.S. dairy industry group’s marketing endeavors have focused on those products that are competitive in the Taiwan market, like cheese, whey powder, and lactose.

Imports of most dairy products declined in 2007 and thus far in 2008 due to high international prices. In 2007, China made significant progress in exporting to Taiwan on several items but these products faced import suspensions over melamine detection beginning in September 2008. The Taiwan trade is expected to be extremely cautious about returning to Chinese sourced products if/when the current ban on imports is lifted, since it will take time to repair consumer confidence in these products.

Local dairy industry sources indicate that because of higher southern hemisphere prices, Taiwan buyers have begun shifting their source of the supply of some specialty dairy items to the U.S. Cheese imported from the U.S. accounted for 11% in 2007 and 14% in the first three quarters of 2008 vs. 7% in 2004 and 8% in 2005.

Fluid Milk

Following Taiwan’s WTO accession on January 1, 2002, imports of the formerly-banned fluid milk was made subject to a Tariff Rate Quota (TRQ) and Special Safeguards (SSG) controls. Fluid milk imports are primarily in UHT format, which is considered by most Taiwan consumers to be of lower quality and poorer taste than domestically produced fresh fluid milk. Except for very limited amount of organic milk for the high-end niche market, there has been no U.S. sourced fluid milk in the Taiwan market.

Further Reading

- You can view the full report by clicking here.

List of Articles in this series

To view our complete list of Dairy and Products Annual, and Semi-Annual reports, please click here

November 2008

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