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Source: Baidu
Though the price of raw milk in China is expected to decrease, the plight of selling raw milk can’t be eased because the price in some foreign countries, like New Zealand, is a lot lower than that in China.
Worsening condition for selling raw milk
The whole situation of China’s dairy
industry is still in the downturn, so China’s cow farming industry is bound to be
suffering the worsening plight in selling raw milk.
Taking China Modern Dairy Holdings Ltd.(Modern Dairy)-the largest cow farming enterprise in China-as an example, the operating revenue in Q1 2016 was USD0.16 billion, down by 10.3% compared with USD0.19 billion in Q1 2015. More seriously, the operating profit and net profit in Q1 2016, USD8.14 million and USD8.37 million, respectively, are both down by over 70 percent compared with that in Q1 2015, USD34.27 million and USD32.91 million, respectively.
Other cow-farming enterprises are also suffering from the plight. According to an insider of Zhong Ding United Farming Dairy Co. Ltd.(Zhongding Dairy Farming), some dairy enterprises began to limit the purchase of raw milk since the end of 2015 because they don’t need so much raw milk and even if they got, some raw milk will be powdered for storage. Though Zhongding Dairy Farming hasn’t suffered losses in current, it may face losses if the purchase price of raw milk is below USD0.53/kg.Now the price of raw milk is around USD0.56/kg.
Unlike big-size farming enterprises, it’s hard for the small- and mid-size farms to endure the sufferings. In 2016, many dairy processing enterprises began to limit the collection of raw milk by miscellaneous reasons. The farmers have no idea but to reduce the price continuously. Now the price is around USD0.53/kg, which is nearly below the cost price. Even if the downstream dairy companies purchase the raw milk on time according to contract, the farmers still suffer due to the low price.
What’s worse, some big-scale farming enterprises are also near collapse. At present, the cash flows of some China’s cow farming enterprises are almost drained. Even if several big-scale farming companies, such as HuaXia Dairy Co. Ltd.and AustAsia Modern Dairy Farm Co. Ltd., also once sought for acceptance of Modern Dairy.
High farming cost dragging competitiveness
The price of raw milk in some foreign countries, like New Zealand, is about half of that in China, causing China’s farmers to be at inferior position in price competition, according to CCM’s research.
From the perspective of feed, the natural pasture offers the cows top-quality and free ingredients in New Zealand, while the cost of feed occupies more than 50% of the total cost of breeding cow in China.
In current, the price of raw milk in China is approximately USD0.56/kg and that of high-class raw milk about USD0.59/kg. However, the price of raw milk in some foreign countries has fallen down to USD0.30/kg or so in 2015 and about USD0.26/kg in current.
During these years, the difficulties in selling raw milk get worsen due to the limited use of China’s raw milk and the larger use of reconstituted milk by some dairy enterprises. For milk processing companies that aim to make profits, they can’t resist the temptation of low price of raw milk in foreign countries. If they use China’s raw milk while their competitors use foreign raw milk, they will be at an inferior competitive position.
What’s more, many dairy enterprises have stocked a large number of milk powder and they have to reduce the purchase of raw milk so as to consume the stock of milk powder. According to Ministry of Agriculture, the stock of milk powder in the whole industry reaches about 500 thousand tonnes in current, which is as three times as that in ordinary situation. And it was similar to 10 percent of raw milk production within a year in China.
- IFT (the Institute of Food Technologists )
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