Chinese dairy processors turned away from WMP roughly two years ago after the product delivered heavy losses on their financial statements, and they moved output toward cream, butter and SMP instead, StoneX report. Cream found a ready home because the food service industry was strong, which left skim arriving as the leftover rather than the target. The demand side moved at the same time, and as YiFan Li puts it, “the guys who previously using SMP, most of them have already switched and adjusted the formula to using liquid skim milk”. Specifically, that combination stripped out the need for imported powder on two fronts at once, supply up and formulation demand down. For buyers outside China, the practical consequence is that the import gap is structural, not a pause in consumption waiting to correct itself.

Total Chinese consumption of SMP is shrinking even as overall dairy demand grows, and the surplus is now large enough that the country’s processors are looking beyond their own market. Domestic production has held up rather than declined, so the excess is not being absorbed at home. That turns a country the trade has long treated as a destination into a potential origin, which changes the competitive picture for exporters selling into Asia. According to Li, “when they look at the total consumption of skim milk powder in China is definitely shrinking, and that’s why the import number shows that a significant drop on Chinese skim milk powder imports, and some top processors are even looking to export their ingredient to the rest of the world”.