Market catches up with dairy farmers

Collapsing milk prices are forcing Chinese farmers to take drastic measures. Many are reportedly dumping their milk and slaughtering their cows. Several factors lead to this situation.

The international market overestimated dairy demand from developing nations, fueling rapid industry expansion in 2014. However, slowing growth in major emerging-market economies like China and India has put a damper on consumption.

Last year also saw raw milk prices in New Zealand and other key dairy-producing nations decline by between 30 and 40 percent. Chinese processors jumped on these discounts and scaled back domestic procurement.

What's more, it's difficult to ensure quality when sourcing raw milk from China's small, scattered dairy farmers. In light of several high-profile scandals, many dairy brands are turning their backs on individual farmers, choosing instead to establish their own modern farming facilities and partnerships with industrial-scale overseas suppliers.

Over the long term, such structural transformations will benefit the industry and help dairy firms shake off their tainted reputations. This also means small farmers who cannot adapt will be weeded from the market.