10% increased demand for formula expected from China’s relaxed baby policy
This is according to Rabobank in its latest research article, which suggests that a 10% incremental demand for formula is expected once the new policy goes into full implementation.
The agribusiness bank believes infant formula will be the primary beneficiary of the policy change to bring increased manufacturing over time, boosting the exports of ingredients including whey protein concentrate, skimmed milk powder, whole milk powder and lactose into China, in addition to finished products.
“The assumption is of a 16.6% average increase in newborn babies annually over the five years following the full implementation of the ‘One Couple, Two Kids’ policy,” the advisory said.
“Assuming also that the current breastfeeding ratio of 28% remains unchanged for the second child, Rabobank initially estimates that the IMF market could be boosted by about the same 16.6% a year—equivalent to about 117,000 tonnes/year (based on Euromonitor data of 704k tonnes in 2014).
“This may add an estimated 3-4 percentage points to our current IMF volume growth expectation of 7-8% CAGR into 2020.”
Sandy Chen, director of Rabobank’s food and agribusiness advisory, advised the segment to take a long-term view.
“An increase in the population growth means a positive longer-term growth in dairy demand but it will only bring about a small shift in the overall dairy market and the impact on dairy companies will depend on their category exposure,” Chen said.
The one-child policy will stay in place until March next year, after its original controversial introduction in 1979 to slow the Asian country’s population growth.