Bright Dairy price hike signals milk inflation

Shanghai-based Bright Dairy & Food Co said Tuesday that it would raise prices on some of its dairy products by an average of 5 percent starting from Tuesday, in response to increasing raw milk costs.

Some categories of fresh milk and yogurt will be priced higher, which is likely to affect the company's business performance in 2013, Bright Dairy said in an announcement posted on the Shanghai Stock Exchange website Tuesday, without giving details on how it may be affected.

The company, which produces 12 types of fresh milk and 10 types of yogurt, could not be reached by press time.

"Bright Dairy's products are already priced higher than other brands like Mengniu and Yili. If it raises prices more, I may turn to other domestic brands," a Jiangsu resident surnamed Yu told the Global Times Tuesday.

Market leaders China Mengniu Dairy Co and Inner Mongolia Yili Industrial Group also recently raised the prices of several products by 5 to 10 percent, Guangzhou Daily reported Tuesday.

More domestic dairy makers will follow suit, given that the domestic price of cow forage, accounting for more than half of raw milk costs, has been rising significantly since 2011, Chen Lianfang, a dairy analyst at Beijing Orient Agribusiness Consultants, told the Global Times Tuesday.

Cow forage consists mainly of corn and soybean meal. Data from the Ministry of Agriculture (MOA) indicates that in the first week of December, the average corn price rose by 2.1 percent year-on-year, while the average price of soybean meal jumped by 20 percent.

The MOA forecast in March that the price of raw milk in China would keep rising this year. In the first week of December, the average price reached 3.37 yuan (54 cents) per kilogram, up 4 percent year-on-year.

Chen also attributed the price inflation to the slowing growth of domestic raw milk output this year, as domestic dairy farmers were forced to sell cows under the pressure of falling demand due to cheaper imported milk.

According to the Vancouver-based International Federation of Clinical Neurophysiology, the international raw milk price was 41 cents per kilogram in November, compared with China's 3.34 yuan (53 cents) per kilogram in the same period.

Many domestic dairy firms have begun to establish overseas raw milk bases to cope with the higher price of domestic raw milk.

Yili announced Tuesday it would establish a formula powder project in New Zealand, which is expected to provide the company with raw milk as well.

In 2013, domestic dairy makers will continue to be burdened with increasing costs of raw milk and labor, and are likely to raise the prices of some dairy products, Wang Dingmian, former chairman of the dairy association in South China's Guangdong Province, told the Global Times Tuesday.