Dairy enterprises urged to help farmers through hard times

Price trend of fresh and raw milk between September and December, 2014.

(ECNS) -- Dairy enterprises are urged to sacrifice part of their profits to support local farmers through the industry's cold winter in Xingtang county, North China's Hebei province, Beijing News reported.

Dairy farmers have been dumping milk or even selling cows because of a drop in demand from dairy enterprises across the region, according to a report in the newspaper on January 6, 2015.

Want Want Group signed a contract with a local dairy farming district stating its Shijiazhuang branch would buy all fresh milk produced. However, branch only agreed to purchase 80 percent of all fresh milk due to a drop in demand since November, 2014.

Dairy farmers have had no other choice but to discard the remaining 20 percent and even sell pregnant cows.

As milk prices fall, feeding costs are going up, a local official commented.

Milk prices have plummeted to 3.6 yuan ($0.579) a kilogram from 5.5 yuan ($0.885) a kilogram since early 2014, which prompted dairy companies to limit the production and purchase of fresh milk, the official added.

Want Want Group has been overstocking for two months, which resulted in a decline in production and a reduction in purchasing by its Shijiazhuang branch, it was said.

In response, the Ministry of Agriculture has asked all local animal husbandry and veterinary departments to help ensure the interests of local farmers are protected and dairy production is stabilized.

The Hebei government has since addressed the matter in coordination with the local government and Want Want Group's Shijiazhuang branch as well as relevant dairy farming districts.

Dairy enterprises would share the risks and help local farmers through this rough patch, according to a provincial government source.

All dairy companies in Hebei province should keep to purchasing the required amount of fresh milk from local farmers, the source stressed.

On January 8, dairy farming districts in Xingtang county were informed that the 80 percent limit had been cancelled and all fresh milk was to be handed in, according to a local farmer.

Data from the Ministry of Agriculture shows that compared with the beginning of 2014, average prices for fresh and raw milk in December, 2014 had fallen by 9 percent and hit its lowest point in 14 months - 3.81 yuan per kilogram.

Raw milk prices across China – from Shandong to Hebei to Qinghai - have suffered a drop.

Dairy enterprises' need for domestic milk sources is decreasing due to the increase of imported fresh milk. Public data indicates that the volume of imported liquid milk has soared to 280,000 tons in 2014 from 3,800 tons in 2005.

Song Liang, a dairy industry analyst, mentioned that prices for fresh milk are expected to fall 15 to 20 percent in 2015.

It was added that prices for imported milk powder have tumbled from 55,000 yuan ($8,850) per ton in April 2013, to the current 19,000 yuan ($3,057) per ton.

As the domestic dairy industry becomes more connected with the international market, global market prices would have a greater effect on local enterprises, Song explained.