Asian Dairy Companies Surge as China Dumps One-Child Policyby and
Demand may increase for baby products including dairy, diapers
Global dairy prices have slumped as China imports slowed
Asian dairy companies surged on expectations the end of China’s one-child policy will boost demand for products including infant formula.
Yashili International Holdings Ltd. jumped as much as 13 percent in Hong Kong trading as China Mengniu Dairy Co. gained as much as 7.8 percent. New Zealand’s Fonterra shareholders Fund, which tracks the earnings and dividends of the world’s biggest dairy exporter, closed 0.6 percent higher. On Thursday, Danone rose 1.5 percent and Glenview, Illinois-based Mead Johnson Nutrition Co. climbed 3.8 percent.
China, the biggest consumer of dried milk powders used in infant formula, plans to allow all couples to have two children, the official Xinhua News Agency said Thursday at the end of a four-day party gathering in Beijing. The country already accounts for about half the world’s whole milk powder consumption, though purchases are expected to drop about 40 percent this year as economic growth slows and the nation works through large dairy stockpiles, U.S. Department of Agriculture data show.
“Scrapping the one-child policy is positive for companies producing baby products, including milk and diapers,” said Naohiro Niimura, partner at researcher Market Risk Advisory in Tokyo. “Consumption of infant formula could double if Chinese couples start having their second child, boosting earnings for milk producers in China as well as in other nations exporting products to the Chinese market.”
The one-child policy, which limited most couples to one or two children depending on ethnic background and where they lived, was a cornerstone of late leader Deng Xiaoping’s efforts to overhaul the economy. When the policy was adopted 36 years ago, the thinking was that the birth rate of almost three children per woman was a drag on growth. The cap has since been relaxed.
World milk prices have slumped this year in part because of a slowdown in Chinese imports. The collapse has spurred losses for farmers from Europe to New Zealand, sparking protests and leading the European Union to adopt a 500 million-euro ($549 million) emergency aid package to help keep some producers in business.
“China’s decision to end its one child policy is a potential positive for the dairy market as it is likely to boost longer‑term demand for milk products,” Commonwealth Bank of Australia said in an e-mailed note. “The short‑term has been gloomy.”