On 20 March, the Hebei Raw Milk Price Coordination Committee held a meeting in
Tangshan City, at which the Q2 reference purchase price for raw milk was set as
follows:
-
Large commercial dairy farms: RMB3.85/kg
-
Co-operative dairy farms: RMB3.43/kg
“Dairy companies and farmers are expected to support each other to achieve
joint development,” said Zhang Qiang, Director of the Hebei Provincial Animal
Husbandry and Veterinary Bureau, “It is necessary to regulate the raw milk purchase and sales contract and the implementation of the ‘reference price’
mechanism, to improve the scale of farming and modernised management, to
maintain a relatively stable purchase price and to keep purchases in order. The
joint efforts of dairy companies and farms will help ensure the milk quality
and reduce farm costs.”
The price declines are as follows:
-
Large dairy farms: down by 3.5% QoQ
-
Cooperative dairy farms: down by 4.4% QoQ
In comparison:
-
Shanghai - here the purchase price is
RMB3.80/kg in H1, reflecting its minor milk production
-
Inner Mongolia Autonomous Region - here the
latest purchase price has yet to be released. The lowest figure locally in 2015
was RMB1.40/kg, with recovery to RMB3.80/kg in the peak period towards the end
of the year, although this was still lower than that in the same period of 2014
In general, Q1 sees the peak season for the sales of dairy products, meaning
strong demand for raw milk and relatively high milk prices. Whilst in summer
production lowers due to the high temperatures, and processors may resort to
milk powder and reduce their milk purchases, depressing the purchase price.
H1 is widely expected to see the milk price throughout the country stay stable
and decline slightly. Li Shengli, Chief Scientist of the National Dairy Industry
and Technology System, agreed to this: "In particular, the international
price trend will impact the domestic one." He even predicted that the
domestic purchase price of raw milk will be less than RMB4/kg throughout 2016.
This situation won't change for the better in the short-term - this year will
see more milk from Europe in particular, but the real problem is the stock
levels in play. It should have been no surprise when on 8 March, Fonterra again
reduced its payout in the 2015/16 milking season (June-May) from NZD4.15/kg to
NZD3.90/kg milk solids.
In addition, there are 2 factors in the domestic market also impacting the
purchase price:
-
Decreased feed costs: prices of corn and
soybean meal are currently down by 15-20%
-
Increased imports of milk powder
Notably, the purchase price of raw milk was up by 3.5% YoY in March, however
down by 0.3% MoM. The YoY rise is partially because the purchase price was low
in 2015.
Purchase Price of Raw Milk, November 2014-March 2016
Note: March 2016: as of 9 March
Source: Ministry of Agriculture
This article comes from Dairy Products China News 1603, CCM
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