Dairy farmers in China’s Shandong province have reportedly been putting down their cattle and dumping milk at the start of 2015 after the country saw milk prices plummet in the past year, the Chinese-language Securities Times reports.
One dairy farmer in Shandong’s Weifang City told the newspaper that dairy companies recently stopped collecting milk from around five to six local farmers who collectively own 1,000 head of cattle.
He added that other farmers in the region have seen those companies reduce purchases from them, which forced the farmers to either dump the unsold milk or turn the milk into powder for future sales.
The latest stories from Shandong followed the same trend reported late last year from neighboring Hebei province, where dairy farmers sold milk cows for only 6,000 yuan (US$965) per animal, despite having initially purchased them for 16,000 yuan (US$2,575) each, the newspaper said.
Dairy sector expert Wang Dingmian said that culling cattle and dumping milk have been ongoing practices since 2009 and that more than 100,000 farmers have exited the business annually due to the high feed and labor costs, fluctuating milk prices, and dairy firms pushing down farm prices.
Gu Jicheng, secretary general of the Dairy Association of China, however, said that the situation was confined at the regional and individual levels and that other countries have undergone the same situation during the development of their dairy industries.
The farm prices of milk have dropped from 6 yuan (US$0.96) per kilogram in 2013 to 3.9 yuan (US$0.62) in September, while some farmers in Shandong and Qinghai provinces said prices have dipped further to only 1.6 yuan (US$0.25) per kg at the end of 2014.
The downward trend in milk prices will continue in 2015, dairy industry expert Song Liang said, citing the falling global dairy prices and Chinese dairy companies’ increasing imports of cheaper milk formula as factors contributing to the decline.
Wang said that China remains a market that promises great potential for the dairy business, since the annual per capita consumption in the country had only reached 30 kg in 2013 compared with the global average of 107 kg.
Wang said that Chinese dairy companies should take a long-term view instead of focusing only on short-term profits, and source more from local producers to build a healthy industry at home.
While Wang suggested that the government should introduce tax incentives for companies sourcing locally, Song said that China should establish a milk-powder reserve to relieve the burden on these businesses, which are cash-strapped because of their huge inventory.
Source: China Times