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Brazil's dreams of dairy with China sales authorized - industry group

Ana Mano

SAO PAULO, Aug 1 (Reuters) - Brazil is set to begin dairy shipments to China this month, with industry group Viva Lácteos saying the country could book $4.5 million in annual sales to the country by 2021 as time is needed to build lasting commercial relationships.

The Brazilian Agriculture Ministry announced last week that China had authorized 24 plants to export products including cheese, butter, condensed milk and powdered milk, with shipments expected to start in August.

Marcelo Martins, head of Viva Lácteos, said in an interview on Thursday the authorizations would boost the sector, which plans to focus on cheese exports where it sees a competitive edge.

"Brazilian companies will make cheese sales a priority. There is no way we can sell powder milk, a commodity," he said.

Brazilian dairy companies are eager to return their focus to exports, after more than a decade's absence from China to cater to the domestic market, which grew by 4% annually between 2008 and 2014, Martins said.

"The authorizations were a decisive step to create demand for Brazilian dairy products, and nothing better than the opening of the Chinese market," he said. "But we've got homework to do."

Martins said freight costs and Brazil's unreliable power grid, which is vital to keep and run any profitable dairy operation, also pose challenges to prospective exporters.

Ian Lin, chief executive of Shanghai-based trade consultant Group Serpa, said in an interview China's consumers are not used to buying "a lot" of dairy products, but the culture can change.

A large percentage of China's population is lactose intolerant, according to scientific studies, although marketing campaigns pushing it as part of a healthy diet have helped to develop a sizeable market for dairy in the country.

Lin said imports dominate China's dairy market with New Zealand accounting for 51% of powder milk from overseas, which totaled around 800,000 tonnes in 2018.

Lin emphasized Brazil will face competition from closer suppliers, noting the maritime freight cost is $870 to ship 20 tonnes of dairy products to China from New Zealand. That compares with $1,500 if the cargo came from Brazil.

On the other hand, China imports 110,000 tonnes of cheese a year, with annual growth of 13%, Martins said.

Last year, Brazil's total dairy exports were $58.2 million, with Argentina, Chile and Russia among the largest buyers, according to Viva Lácteos data. (Reporting by Ana Mano; Editing by Richard Chang)