China’s Dairy Farmers Struggle as Surplus and Slumping Demand Drive Losses
Source: DairyNews.today
China’s dairy farmers are facing mounting financial strain as a glut of milk, weakened consumer demand, and falling prices converge, underscoring the economic headwinds confronting the sector.
Farmer Liu Bingyong, who once turned a steady profit from his dairy business in Shandong province, is now hemorrhaging cash, a consequence of an oversupplied market and low purchase prices. “The current state of China’s dairy industry has been long in the making,” said Liu, who has seen his income flip to daily losses of up to 10,000 yuan (RM6,134) at its worst.
While milk is not traditionally part of the Chinese diet, government campaigns promoting its health benefits helped fuel industry growth. However, years of expansion have left the market saturated with milk, forcing many farmers to dump excess supply, convert it to powder, or even cull livestock to mitigate costs. “There’s just too many cows,” said Wu, a dairy farmer in Liaoning province, echoing concerns from across China’s northern dairy belt.
The origins of this crisis can be traced back to the mass import of calves starting in 2019, according to Yifan Li, head of Asia dairy at StoneX. As these cattle reached maturity by 2022, strict COVID-19 lockdowns hampered distribution channels, creating a supply-demand imbalance that has persisted even after restrictions lifted late last year. While milk production increased by 6.3% in 2022, purchase prices for raw milk dropped below the average production cost of 3.8 yuan per kilogram.
With rising overcapacity, the dairy industry faces growing calls for a recalibration. In July, an industry association official estimated that up to 300,000 cattle might need to be culled to stabilize the market. Meanwhile, the agriculture ministry has pledged additional support, though farmers report little on-the-ground relief so far.
This downturn has stark implications for an industry emblematic of China’s economic transformation, which brought once-scarce dairy products into the daily lives of a burgeoning middle class. But consumption remains comparatively low—still only about a third of the recommended annual amount per capita, according to official statistics.
Further compounding concerns, China’s low birth rate threatens future demand growth for dairy, adding uncertainty to an already sluggish market. “The birth rate has some influence, though not a major one,” noted Li. “But the real challenge is getting consumers to see dairy products as essential rather than luxury items.”
As Beijing continues its push for food self-sufficiency, the dairy sector’s capacity remains out of sync with demand, leaving China’s farmers grappling with surplus milk and dwindling margins.
While milk is not traditionally part of the Chinese diet, government campaigns promoting its health benefits helped fuel industry growth. However, years of expansion have left the market saturated with milk, forcing many farmers to dump excess supply, convert it to powder, or even cull livestock to mitigate costs. “There’s just too many cows,” said Wu, a dairy farmer in Liaoning province, echoing concerns from across China’s northern dairy belt.
The origins of this crisis can be traced back to the mass import of calves starting in 2019, according to Yifan Li, head of Asia dairy at StoneX. As these cattle reached maturity by 2022, strict COVID-19 lockdowns hampered distribution channels, creating a supply-demand imbalance that has persisted even after restrictions lifted late last year. While milk production increased by 6.3% in 2022, purchase prices for raw milk dropped below the average production cost of 3.8 yuan per kilogram.
With rising overcapacity, the dairy industry faces growing calls for a recalibration. In July, an industry association official estimated that up to 300,000 cattle might need to be culled to stabilize the market. Meanwhile, the agriculture ministry has pledged additional support, though farmers report little on-the-ground relief so far.
This downturn has stark implications for an industry emblematic of China’s economic transformation, which brought once-scarce dairy products into the daily lives of a burgeoning middle class. But consumption remains comparatively low—still only about a third of the recommended annual amount per capita, according to official statistics.
Further compounding concerns, China’s low birth rate threatens future demand growth for dairy, adding uncertainty to an already sluggish market. “The birth rate has some influence, though not a major one,” noted Li. “But the real challenge is getting consumers to see dairy products as essential rather than luxury items.”
As Beijing continues its push for food self-sufficiency, the dairy sector’s capacity remains out of sync with demand, leaving China’s farmers grappling with surplus milk and dwindling margins.
