"Pouring milk and killing cattle" is now showing signs Many parties have called for enterprises to bail out

"Is this another way for us to 'pour milk and kill cows'?" A few days ago, on the WeChat public account of "Hebei Dairy Association", Yuan Yunsheng, vice president and secretary general of Hebei Dairy Association, published a signed article on this, which aroused strong attention
from all walks of life.
According to a variety of information, the current raw milk price continues to decline, while the rising cost continues to erode breeding profits, the latest performance of Youran Animal Husbandry, Modern Dairy and other companies show that the gross profit margin of raw milk business is under pressure.

Industry insiders said that at present, in the northern areas with a large scale of dairy farming and sufficient supply, such as Hebei, Inner Mongolia, Shandong and other places, there have been signs of "pouring milk and killing cattle", and the southern provinces and cities with less pasture are temporarily normal supply and demand
.
While the supply continues to increase, the lack of consumer demand has led to a phased surplus
of raw milk.
By the end of 2022, raw milk prices had fallen by 6%
from their high two years ago.
"At present, most small and medium-sized dairy farms are overwhelmed under the background of high cost and weak demand, and it is expected that the price of raw milk will continue its downward trend in 2023, and the loss of dairy farms may further expand, and there should be more guarantee mechanisms to solve the pressure
on milk sources.
" A number of industry insiders suggested
.

The cost of farming is high and overwhelming

On December 28, 2022, the fourth fresh milk price coordination meeting of Hebei Province in 2022 announced: It is estimated that the reference price of fresh milk trading in Hebei Province in the first quarter of 2023 is 4.
10 yuan / kg, and the minimum is not less than 3.
93 yuan / kg
.
In view of the current situation, the farm committee took the initiative to reduce the minimum price to 3.
85 yuan / kg, and the dairy company could collect all the receivables, renew the purchase contract on schedule, and compensate for the price difference after the
difficulties eased.

Yuan Yunsheng said that this is the first time in the history of the Hebei Fresh Milk Price Coordination Committee to announce the transaction reference price
with conditions.
The reduced price has no profit room for most dairy farms in Hebei Province, but it is also a helpless move
.

"The reference price of 3.
85 yuan/kg proposed by the Hebei Milk Association is close to the cost line, and it is only a 'reference'
.
" Song Liang, an independent dairy analyst, believes that "the cost of dairy farms of different sizes is different, but it is basically maintained at 3.
5-3.
8 yuan / kg
.
" When the milk price was higher last year, the raw milk in the north could be sold for 4.
6-4.
8 yuan / kg, and the price of milk in the south with fewer farms would be higher
.
In addition, the price set by the farm committee is only a reference, and there is no legal coercion, when the enterprise collects milk, the contract price is finally agreed by both parties, and the enterprise can also set a high price or feel that this price is high and do not collect milk
.
”

This is the background
of some farmers who complain bitterly, get emotional, and even say "pour milk to kill cattle".

Industry insiders said that from the perspective of the entire industry, under the dual impact of falling purchase prices and rising costs, farms have seen income decline or loss-making operations, especially some small and medium-sized ranches are under greater pressure
.
Among them, the rising cost of breeding is an important reason
.
On the one hand, feed costs are rising
.
Since 2022, affected by international factors, the price of corn, soybean meal, alfalfa and other feed has been rising, and even for a time there was a situation
that soybean meal was not only expensive, but also may not be bought.
According to the International Ranch Federation (IFCN), the World Feed Price Index did not fall below US$33/100kg in 2022 and US$28/100kg
in 2020.
On the other hand, under the background of epidemic prevention and control, with the rise of labor costs, epidemic prevention costs, energy costs, transportation costs and other raw material prices, the overall operating costs of domestic dairy farms have remained at a high level
.

Weak demand leads to oversupply

Relevant surveys show that the Double Festival holiday has not effectively boosted the demand for
raw milk.
As of December 21, 2022, the price of 10 major fresh milk producing areas such as Inner Mongolia and Hebei was 4.
12 yuan/kg, down 4.
2%
year-on-year.

The main reason for the continuous decline in raw milk prices is the phased oversupply
caused by weak demand.
According to data from the National Bureau of Statistics, the output of dairy products from January to November 2022 was 28.
489 million tons, an increase of 2.
8%
year-on-year.
Yuan Yunsheng analyzed that due to national policies, local government support for the dairy industry, and high milk prices in 2020, the enthusiasm of dairy farming and pasture expansion has increased significantly, while the yield level of dairy cows has improved, and the domestic fresh milk supply has continued to grow
.
However, due to the impact of the epidemic in the past two years, the level of dairy consumption has declined, coupled with the recent student holiday, school milk has stagnated, and the demand for dairy products is insufficient
.

The slowdown in milk consumption has also put milk processing companies under "pressure", and some companies can only spray the collected fresh milk powder treatment
.
According to incomplete statistics, Hebei Province sprays more than 4,000 tons of surplus fresh milk every day, occupying more than
16 million yuan of enterprise funds every day.

Looking forward to the future market, many industry insiders expect that the price of fresh milk may continue the downward trend
in 2023.
Song Liang said: "Domestic raw milk is determined by the supply and demand of medium and high-end dairy products, and the current decline in overall demand for medium and high-end dairy products is bound to transmit the decline in raw milk prices
.
Now many dairy companies are already subsidizing farming, and the purchase of raw milk from small and medium-sized farms will continue to decrease this year, and the price of raw milk is expected to fall below 3.
8 yuan / kg
.
”

Many places urgently came to relieve difficulties

In response to the current difficulties faced by the whole dairy industry in Hebei Province, on January 6, the Department of Agriculture and Rural Affairs of Hebei Province urgently issued a relief policy and issued the "Urgent Notice on Maintaining the Order of Fresh Milk Purchase and Strengthening Quality and Safety Supervision" (hereinafter referred to as the "Notice"
).
The notice said that at present, the development of the dairy industry is facing unprecedented difficulties, the supply of raw milk has increased, the consumption of dairy products has decreased, the cost of breeding has risen, and milk prices have continued to decline
.
In view of the current difficulties faced by dairy processing enterprises in continuous powder spraying and a large backlog of funds, the notice said that the 15 million yuan of powder spraying subsidy funds in 2023 will be pre-allocated to dairy processing enterprises before January 20, and the subsidy funds of 25 million yuan in 2022 will be issued at the same time to help dairy processing enterprises alleviate financial pressure
to the greatest extent.
At the same time, dairy processing enterprises are required to "collect all fresh milk in the province, renew the purchase and sales contracts in a timely manner when they expire, effectively protect the interests of dairy farmers, and stabilize the order of fresh milk purchase and sales"
.

In addition, the Department of Agriculture and Rural Affairs of Hebei Province will arrange three working groups to go to key counties in the dairy industry to solve the practical difficulties of farm households and coordinate and solve the contradictions
in the purchase of fresh milk.
The agricultural and rural departments of all cities and counties should regularly hold symposiums for farm households to ensure that no "milk dumping incident" occurs and protect the interests of
dairy farmers to the greatest extent.

For dairy farms, the Notice specifically mentions that it is necessary to establish risk awareness and responsibility with dairy processing enterprises to tide over difficulties, strengthen communication and coordination with dairy processing enterprises, and advance and retreat together, develop together and tide over difficulties
.

Shanxi recently held a symposium on the coordination of the healthy development of fresh milk, in view of the recent sharp decline in domestic fresh milk consumption, which directly caused the backlog of milk and low prices in some dairy farms in Shanxi, especially the renewal of milk contracts with some head dairy enterprises, and the phenomenon of different degrees of panic in the industry, coordinated the renewal of contracts between dairy enterprises and dairy farms, and studied and discussed the next work priorities
.
The meeting made it clear that government guidance, association organization, dairy enterprise responsibility, and media supervision will be the main tone
of the province's fresh milk industry management in the future.

The Shandong Dairy Association recently organized an exchange symposium to discuss the relief plan
for the dairy industry.
All parties said that all parties in the dairy industry should work together to warm up and overcome the difficulties
together.
Dairy farming enterprises said that understanding the pressure of downstream dairy enterprises, dairy farms will continue to increase cost reduction and efficiency improvement measures, eliminate low-yield cattle, reduce costs, and ensure cash flow, and also hope that dairy enterprises can "transfuse" and "supply oxygen" for pastures, coordinate relevant resources, and tide over difficulties with farms
.

Wang Chengwu, president of the Shandong Dairy Association, said that the association will coordinate the stable supply and demand relationship between dairy enterprises and dairy farms to achieve full collection, and at the same time timely feedback the voice of the industry to the government department to promote the implementation
of the relief policy of Shandong dairy industry 。 The meeting put forward "five strengthening": strengthening responsibility and implementing the main responsibilities of all parties; Strengthen services to guide farms to reduce costs and increase efficiency; Strengthen docking and alleviate current difficult problems; Strengthen support and organize entities to tide over difficulties together; Strengthen supervision to ensure the quality and safety of dairy products, in addition, pastures should optimize the structure of cattle, do a good job in breeding management, and effectively reduce costs and improve quality and efficiency; Dairy enterprises should face the current difficulties, ensure that all the receivables are collected, and put an end to the occurrence of unreasonable rejection
.

On January 9, the China Dairy Association issued an appeal, saying, "Due to the superposition of various factors such as the epidemic, the current consumer market is generally sluggish
.
" The growth of dairy consumption is slow, and the demand for fresh milk from dairy enterprises is decreasing
.
Thanks to various dairy revitalization initiatives, dairy stocks and milk production have increased
significantly in recent years.
Although the demand for fresh milk has decreased, dairy companies are actively acquiring and increasing powder
spraying.
In the field of aquaculture, the purchase price of fresh milk continues to decline, production costs continue to rise, and comprehensive benefits continue to decline
.
In the field of processing, product sales are not smooth, the number of powder spraying is increasing, and the capital chain is facing challenges
.
Signs of difficulties in the delivery of raw milk have emerged or may appear
in a few areas.
”

"Dairy industry is a healthy China, strong national industry, is the coordinated development of the first, second and third industries of the industry, to maintain the good development of the dairy industry, need the state and relevant departments to give active support, need the whole industry and the whole chain of all links to develop and innovate, benefit sharing, risk sharing, work together in the same boat, actively through technology and management innovation to increase cost saving and improve quality and efficiency measures, actively through product structure adjustment and popular science publicity guidance, effectively open up the consumer market, effectively alleviate industrial difficulties, ensure that the dairy industry seeks progress in stability and change, Promote the sustainable and healthy development of
the dairy industry.
It is hoped that all localities will actively act, innovate and pragmatically support relevant support policies, maintain the current good situation of dairy industry revitalization, and promote the comprehensive revitalization and high-quality development
of the dairy industry.
The China Dairy Association further appealed
.

(Yang Xiaojing, comprehensive collation)

China Food News(Version 04, January 10, 2023)

(Responsible editor: Yang Xiaojing).