What is the market size of the dairy farming industry?

What is the market situation in the dairy farming industry? Recently, the prices of fresh milk in 10 major producing provinces have decreased year-on-year. What is the overall situation of raw milk production? Why have prices weakened recently? How to promote high-quality development of the dairy industry?

According to data from the National Bureau of Statistics, China's milk production in 2022 was 39.32 million tons, a year-on-year increase of 6.8%. Based on this increase and the total milk production in 2021, the total milk production in 2022 is expected to reach 40.3 million tons, exceeding 40 million tons for the first time. Meanwhile, the self-sufficiency rate of milk sources in China, calculated based on apparent consumption, will achieve its first rebound since 2016, reaching 67%. However, due to a decrease in demand for dairy products and an increase in feed prices, China's dairy farming industry will also face prominent difficulties in squeezing prices down and costs up in 2022.

In the development process of modern dairy farming industry, it is necessary to actively promote the technology of fully mixed ration processing. Ensure that all links of forage and feed processing are well matched, and ensure that cows can eat a fully mixed diet with comprehensive nutritional value and better palatability.

According to the statistical analysis of the "2022-2027 China Dairy Cattle Breeding Industry Market Panoramic Survey and Investment Value Evaluation Research Report" published by the Zhongyan Puhua Industry Research Institute:

Deep analysis of the market for dairy farming industry

Under the dual pressure, the income from dairy farming has significantly decreased, and the milk to feed ratio, which reflects the benefits of farming, is at its lowest level in 10 years. Due to the significant increase in powder spray volume faced by dairy companies, the risk of rejection and limited collection of raw milk has significantly increased. Therefore, in the situation where the Hebei Provincial Fresh Milk Price Coordination Committee has set the lowest reference price for fresh milk transactions in the first quarter of 2023 in the province at 3.93 yuan/kg, the members of the breeding farm have voluntarily proposed to lower the lowest price to 3.85 yuan/kg, in order to encourage dairy companies to fully collect their receivables and renew their acquisition contracts as scheduled. However, the minimum price is close to or even lower than the production costs of some farms.

The imbalance in raw milk production and demand in this round is mainly caused by short-term factors. The contradiction between the rapid decline in demand in the short term and the rigid growth of production capacity has led to a phased surplus of raw milk. "Liu Changquan, Director of the Industrial Economy Department of the Rural Development Research Institute of the Chinese Academy of Social Sciences and Director of the Industrial Economy Department of the National Dairy Industry Technology System, said that there are two issues that need to be addressed. One is the current production capacity of raw milk, including the newly added production capacity, which is not excess capacity, but rather a phased surplus compared to a brief decline in demand. In recent years, the main driving force for active investment by dairy farmers and enterprises has been the rapid growth of dairy product consumption demand and the expectation of significant growth in the future. Although demand has decreased in 2022, the medium to long-term growth trend has not changed, and significant growth will be achieved in 2023 with the recovery of economic and social activities. The current and newly added raw milk production capacity is crucial for ensuring the growing demand for dairy products. Secondly, the production capacity of small and medium-sized aquaculture farms may be greatly impacted. In recent years, with the large-scale construction of domestic breeding farms and the expansion of processing enterprises towards the breeding end, there has been a phased surplus of raw milk. Processing enterprises must first stabilize and protect their own milk production capacity, and small and medium-sized breeding farms will become more vulnerable and bear most of the risks.

Yogurt, milk powder, cakes, fresh milk... These ubiquitous dairy products have become indispensable necessities for residents' daily lives, and these products cannot lack the raw material of high-quality milk. The good market prospects and the advantage of being close to large dairy comprehensive enterprises have led to the good development of the dairy farming industry in Luancheng District.

At the Fukang Dairy Cattle Breeding Professional Cooperative, the cow sheds are arranged in a well-proportioned manner, with each cow strong and sturdy. Taking advantage of the warmth of the sun, they comfortably lie on the sand and take a "sunshine bath". The automatic fecal cleaning system in the cowshed is completing the automatic cleaning work of the cowshed under the sound of the iron chain pulling "clattering", and the dry wet separation is completed, which is environmentally friendly and also achieves recycling and reduces costs.

At present, the cooperative has more than 600 cows, which are fed according to different periods of cattle, and all feed is scientifically proportioned and mixed with imported raw materials. After scientific nutrition feeding and automated management, the daily milk production of each cow has reached 30 kilograms, an average of 1 kilogram more than before, greatly improving our economic benefits Liu Baoge, General Manager of Fukang Dairy Cattle Breeding Professional Cooperative, proudly introduced that with the guidance and assistance of relevant departments in Luancheng District, the dairy farm has invested over a million yuan to install automated management and monitoring systems for milk automatic uploading, precise feeding, breeding period detection, environmental control, and other aspects. This has achieved automated and standardized farming, not only improving production but also ensuring quality.

In recent years, through continuous reform, rectification, and development, China's dairy farming industry has steadily promoted upgrading and transformation, and has achieved significant results.

At present, the demand for dairy products in China is 55 million tons per year, and in five years, it will be at least 60 million tons or more. The "Several Opinions on Further Promoting the Revitalization of the Dairy Industry" proposed by nine ministries including the Ministry of Agriculture and Rural Affairs states, "Strive to achieve a national dairy production of 45 million tons by 2025." This means that according to the target requirements, by 2025, the milk production needs to increase by about 10 million tons, with an average annual increase of about 2 million tons. The arduous task is to go further, We need to double our efforts.

Large domestic dairy companies still rely on liquid milk and other products as their main source of income, and brands such as Mengniu and Yili are even more outstanding in this field. With the continuous expansion of the liquid milk market, product upgrading has become the main topic of liquid milk. The future rise in milk prices may become a trend, and the prospects for the dairy farming industry are promising.

Market Prospect Analysis of Dairy Cattle Breeding Industry

The continuous increase in feed costs is mainly due to the structural problem of long-term insufficient supply of feed grains. According to data from the Ministry of Agriculture and Rural Affairs, the average price of corn in China increased by 12.0% and 26.0% year-on-year in 2020 and 2021, respectively; At the end of 2022, the prices of corn and soybean meal increased by 45.9% and 55.0% respectively compared to the end of 2019. According to the monitoring data of the national dairy industry technology system, the production cost of raw milk from radiation farms increased by 14.4% at the end of 2022 compared to the end of 2019. Although the increase in raw milk production cost is smaller than the increase in feed price due to the improvement of cow yield and feed conversion efficiency, the proportion of feed cost in raw milk production cost still has a significant increase, which is significantly higher than other dairy developed countries. In November 2022, the average price of soybean meal in China reached 5.58 yuan/kg, which was 46.8% higher than the price at the beginning of 2022.

Experts say that to solve the current difficulties faced by the dairy farming industry, the focus should be on protecting the production capacity of small and medium-sized farm households and strengthening feed and grain supply, and short-term and long-term policy measures should be taken as a whole. In the short term, the first step is to implement policy based temporary storage for small and medium-sized aquaculture households as soon as possible, stabilize raw milk prices and ensure the sales of raw milk for small and medium-sized aquaculture households through targeted absorption of excess output. Specifically, a temporary storage fund can be jointly funded and established by the central government and the local finance of the main producing provinces. The total amount of storage and the upper limit of the breeding scale of storage and collection farmers can be reasonably determined. Based on a unified accounting method, a storage and collection price that is not lower than the unit cash cost and not higher than the unit total cost can be determined, and it can be collected by milk stations and stored by processing enterprises. Secondly, multiple measures should be taken to slow down the current output growth, including ending the production of lactating cows in advance, adjusting nutrition to reduce output, and accelerating the elimination of low yielding cows.