China’s Beef and Dairy Farmers Struggle Amid Price Drops and Rising Costs
MARA’s data indicates a significant drop in beef prices over the past two years, with the September 2024 average down 23% since the decline began in January 2023, now hovering at the same level as in 2019. Similarly, milk prices have also been on a downward trajectory, with the September 2024 wholesale price 24% lower than at the start of 2023. The current milk price is now below its level from 12 years ago.
A commentary in Economic Daily highlighted the sector’s oversupply issues, which are leading to depressed prices and financial strain across many businesses. The commentator suggested advising farmers to scale back their livestock capacity by culling older cows, but also cautioned against significant capacity reductions that could threaten the long-term viability of the industry.
Financial challenges are a critical concern, with many farms facing shortages of working capital. With high fixed costs for infrastructure and long production cycles, the need for financing has become acute. The State Council’s proposed relief measures include encouraging banks to lend to cattle farms using livestock as collateral and offering subsidies for beef cattle insurance. However, given the financial strains in China’s banking sector following the property market crisis, it is unclear if sufficient lending will materialize.
Feed costs are particularly problematic, with China producing only 70% of the forage needed for cattle and sheep farming. Local officials, according to the Economic Daily commentator, have restricted the planting of forage crops, interpreting China’s food security laws too narrowly by prioritizing grain crops. Environmental regulations further complicate the issue, with local governments sometimes restricting livestock farming to meet environmental protection targets.
China’s beef prices have diverged from international trends. While U.S. beef prices have risen and Brazilian prices have remained low, China’s imports of beef have surged, up 65% since 2019. Despite weakening domestic demand, beef imports from South America, which now account for three-quarters of China’s imports, have continued to grow.
In contrast, China’s milk powder imports have declined sharply since peaking in 2019, reflecting a shift in domestic production. According to USDA forecasts, China’s milk powder imports in 2024 are expected to be half of the 2019 peak volume.
