Chinese dairy producers are facing substantial losses in the first half of 2024 due to oversupply and weak demand. Key companies report significant financial setbacks as milk prices fall below production costs, with the market expected to remain under pressure.
China’s dairy industry is grappling with severe financial losses for the first half of the year, attributed to an oversupply of milk and weak consumer demand. Major dairy producers are reporting substantial losses, highlighting the sector’s ongoing struggles with pricing pressures and market imbalances.
Industry Losses
Modern Farming Group, a significant player in China’s dairy sector, has projected a net loss between CNY180 million and CNY240 million (USD25.1 million to USD33.4 million) for the first six months of 2024. This is a sharp contrast to the CNY220 million profit recorded during the same period last year. The company has adjusted its strategy by reducing the number of low-yielding cows to improve herd quality, a response to falling cattle prices.
China Shengmu Organic Milk also anticipates a net loss between CNY130 million and CNY150 million, a reversal from a net profit of CNY23 million (USD3.2 million) the previous year. Meanwhile, Aust Asia Group expects its losses to have surged to between CNY600 million and CNY700 million.
Market Conditions
The dairy industry is experiencing severe market adjustments due to falling demand and a slowing increase in domestic raw milk production capacity. In late July, the average price for raw milk in major production regions, including Inner Mongolia and Hebei province, was CNY3.22 (45 US cents) per kilogram. This marks a 14.1 percent decrease from the previous year and a slight drop from the prior week.
Price Changes and Losses
| Company | Projected Loss (CNY) | Previous Profit (CNY) | Average Milk Price (CNY/kg) | Price Change (%) |
| Modern Farming Group | 180-240 million | 220 million | 3.22 | -14.1% |
| China Shengmu Organic Milk | 130-150 million | 23 million | 3.22 | -14.1% |
| AustAsia Group | 600-700 million | N/A | 3.22 | -14.1% |
The table above outlines the projected financial losses for key dairy producers and the average price of raw milk in major production regions.
Future Outlook
The oversupply issue is expected to be more severe this year compared to last, according to Li Shengli, chief scientist at the National Dairy Industry and Technology System. The industry’s capacity reduction efforts will be crucial in restoring market balance. Analysts suggest that while the market faces ongoing pressure, adjustments in supply and demand dynamics will determine whether the sector can stabilize.
As the dairy industry contends with these challenges, producers and stakeholders are closely monitoring the situation, hoping for a turnaround as adjustments to production and market strategies continue.
