China’s dairy farmers are facing financial difficulties as surplus milk and reduced consumer demand drive down prices. The industry is oversaturated, with many farmers experiencing significant losses. Despite government efforts to support the sector, a mismatch between production and demand persists, compounded by low dairy consumption and demographic trends.
China’s dairy farmers are confronting severe economic challenges as an oversupply of milk, combined with weakening consumer demand, has led to falling prices and mounting financial losses. The situation has left many dairy producers, especially in Shandong and Liaoning provinces, struggling to keep their operations afloat.
One such farmer, Liu Bingyong from Shandong, has seen his once-profitable dairy business turn into a daily financial drain, with losses reaching up to 10,000 yuan (approximately $1,290 USD) at its worst. Liu’s situation is reflective of broader trends across China’s dairy industry, where the market has become oversaturated after years of rapid expansion fueled by government campaigns promoting the health benefits of milk.
The crisis has deep roots, stemming from a mass importation of calves starting in 2019. As these cattle reached maturity in 2022, the COVID-19 pandemic disrupted distribution channels, compounding the supply-demand imbalance. Milk production rose by 6.3% in 2022, but the price farmers were paid for raw milk fell below production costs, leaving many struggling to break even.
Some farmers have been forced to dump excess milk, convert it to powder, or even cull livestock to reduce costs. Industry experts suggest that up to 300,000 cattle may need to be culled to stabilize the market. Meanwhile, China’s Ministry of Agriculture has pledged additional support, but farmers report little improvement on the ground.
Despite being an essential part of China’s economic transformation, dairy consumption remains relatively low, with Chinese citizens consuming only about a third of the recommended annual amount of dairy per capita. This poses an additional challenge as the country grapples with a declining birth rate, further limiting future demand growth for dairy products.
China’s ongoing push for food self-sufficiency is further complicated by the imbalance between dairy production and consumer demand, leaving farmers in a precarious situation as they contend with an oversupply of milk and shrinking margins.
