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China produces more milk on fewer farms
China will produce about 4% more milk this year, the US Department of Agriculture expects. It does that with fewer dairy farms. Large numbers of small and medium-sized farms are falling due to a combination of high feed costs and low milk prices.
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Chinese state media report this. The American expectation is that China will produce about 42 billion kilos of milk this year. Higher production and the weakened economy will keep imports relatively limited.
The production costs of milk in China have risen enormously, because the country is highly dependent on imports for animal feed. Roughage is imported in large volumes, just like (raw materials for) concentrates.
Soya, for example, is already more than 45% more expensive this year than last year. And feed costs make up a large part of all costs on an average dairy farm. According to Chinese figures, feed accounts for 65 to 70% of all costs. In the meantime, the milk price has fallen sharply due to a combination of strong competition and a weakened economy. A small cooperative of dairy farmers (500 cows) in the northeast of the country complains about a milk price of only 25 cents (2 yuan) that they receive. Reason why the farm is being closed down. "Only the very biggest can survive," complains a farmer.
Feed costs
This concerns companies with many thousands, if not tens of thousands, of cows. But they also have an average of almost 50 cents (3,8 yuan) per kilo of milk in feed costs. They survive partly thanks to a strong bond with a large dairy processor.
It is striking that until recently these large processors still reported high profits. So reported Yilic last month a profit of €1,23 billion over the past year, on a turnover of €16,1 billion. The company also continues to invest heavily and has just opened a large lactoferrin factory. Well in New Zealand then.