High cost and market downturn, the raw milk industry encounters a "cold snap" in the new year

　　High feeding costs and a sluggish market put pressure on the raw milk industry in the New Year.

　　A reporter from China Business News recently visited and learned that due to the impact of the epidemic on the consumption of downstream dairy products, coupled with the accelerated expansion of the domestic raw milk industry in the past two years, the balance between supply and demand of raw milk has been broken again, and the combination of high feeding costs and the decline in milk prices has caused some small and medium-sized The ranch once again faced the embarrassing situation of withdrawing from "selling cattle".

　　Raw milk market downturn

　　"The current raw milk market situation is not optimistic." Xu Feng, the person in charge of a large modern ranch in Hebei, told Yicai.com reporters that every Spring Festival is the peak season for traditional dairy products sales, and dairy companies will collect milk in advance to stock up. The market will be booming in both supply and demand, but 2022 This year's peak season is a bit more "chill".

　　In Xu Feng's view, the reason for this phenomenon is related to the poor sales of downstream dairy companies. In 2022, domestic dairy consumption will continue to slow down, and the pressure will also be transmitted to the upstream raw milk industry. At present, some large dairy companies have begun to limit Collect milk.

　　The lack of supply and demand in the market has also caused the price of raw milk to further decline.

A reporter from China Business News learned that in the middle of the year, the milk price of large pastures can still reach 4.2 to 4.3 yuan/kg, but at the end of the year, the milk price has dropped to 3.9 to 4 yuan/kg.

Some small and medium-sized ranches are under greater pressure. After the milk supply contract expires in 2022, downstream dairy companies choose not to renew the contract.

　　Song Liang, an independent dairy industry analyst, told Yicai Global that since the second half of the year, domestic milk prices have been declining slowly. During a recent survey of Ningxia’s dairy regions, it was found that the current milk price in Ningxia has also dropped to about 3.8 yuan/kg. The ranch has not yet received a milk supply contract for the new year.

　　According to data from the Ministry of Agriculture and Rural Affairs, in the fourth week of December 2022, the average raw milk in 10 major producing provinces including Inner Mongolia and Hebei was 4.12 yuan/kg, a year-on-year decrease of 4.2%.

　　The ever-falling milk price has also put continuous pressure on pasture operations.

　　From the beginning of 2022, due to the sharp rise in international bulk raw materials, feed prices such as soybean meal and corn have risen sharply. The cost of feed raw materials accounts for about 70% of the total cost of raw milk, which also squeezes the profits of ranches.

Li Shengli, the chief scientist of the National Dairy Industry Technology System, previously pointed out that in the case of rising feed costs, the average domestic raw milk price needs to be maintained at more than 4.3 yuan/kg in order to ensure the basic profit margin (8%).

　　By the end of 2022, feed prices will still run at a high level.

According to the research report of Haitong Securities, from December 3 to December 9, 2022, the average price of corn will be 2,970 yuan/ton, an increase of 8% year-on-year; the average price of soybean meal will be 5,370 yuan/ton, an increase of 45.5% year-on-year; the average price of imported alfalfa The CIF price was US$562.7/ton, a year-on-year increase of 43.5%.

Xu Feng also said that although the current price of soybean meal has dropped by about 1,000 yuan/ton compared with the peak of this round, the cost of other feeds is still high. Under the ebb and flow, the pressure on pasture management is increasing.

　　According to the prospectus of the dairy farm operator Australia Asia Group, the net profit of Australia Asia Group in the first half of 2022 will be US$29.842 million, a decrease of 62.7% from US$80.043 million in the same period of 2021, and the gross profit rate of raw milk will drop from 34.3% in 2019 to 2022. 27.2% in the first half of this year, and it is expected that the profit for the whole year of 2022 will decline year-on-year.

On the first day of listing, Australia Asia Group fell below the IPO issue price.

multiple factors

　　It is worth noting that due to the frequent occurrence of domestic epidemics in 2022, it will also have a certain degree of impact on domestic dairy consumption, and downstream dairy companies are also facing growth pressure that has rarely been seen in recent years.

　　At the performance meeting of the previous three quarters, Yili’s management revealed that domestic dairy consumption is still in a weak recovery in the third quarter of 2022. Although the impact of the epidemic is better than that in the second quarter, the outbreaks that occur from time to time in various places have restored consumer confidence and consumption power Affected by some, Yili's performance growth in the third quarter also slowed down compared to the first half of the year.

　　According to the report of the Dairy Economy Research Office of the National Dairy Industry Technology System, my country imported a total of 3.0198 million tons of various dairy products from January to November 2022, a year-on-year decrease of 17.9%, and the import value was US$12.825 billion, a year-on-year increase of 0.6%. Except for a slight increase in the import volume of milk and cream products, the import volume of all other categories decreased.

　　Recently, some institutions believe that since the fourth quarter of 2022, due to the spread of the epidemic and the decrease in terminal passenger flow, the consumer confidence index will be at a low level, and the growth rate of sales revenue of dairy companies in the fourth quarter will still be affected.

　　Xu Feng told the first financial reporter that at this stage, downstream dairy companies have begun to powder store raw milk that cannot be digested, so they are unable to digest more raw milk.

Under the current circumstances, the large ranches can barely maintain, and some small and medium-sized ranches have become unsustainable, and have to sell their dairy cows to raise beef cattle, or withdraw from the market.

　　At the same time, the imbalance between supply and demand in the raw milk industry this round is not only affected by weak market consumption, but also related to the intensive expansion of upstream dairy farming in recent years.

　　Song Huiting, chairman of Jiangsu Jiahui Biotechnology, told the first financial reporter that the number of new dairy cows in China has been too large in the past three years. Once the market environment changes, there is not much pressure on the self-built pastures of large dairy companies, but a large number of small and medium-sized social pastures Faced with the embarrassing situation that no dairy company accepts milk.

　　Since 2019, the domestic raw milk industry has stepped out of a downward cycle, milk prices have continued to rise, and cattle farming has started to make money again.

Especially after 2020, the consumption of domestic dairy products has shown rapid growth under the epidemic, which has also pushed up domestic milk prices. Under the effect of making money, some farmers have begun to accelerate the expansion of their breeding stock or build new pastures.

The shortage of international dairy cows once caused the price of dairy cows to rise rapidly, and even the price of young cows reached 23,000 to 24,000 per head. After importing, it will take 1-2 years to form a stable production capacity, which further increases the pasture. overall cost.

　　Previously, the industry had predicted that in 2021 and 2022, the number of domestic dairy cows would increase from 4.71 million in 2019 to 5.76 million and 6.35 million.

　　Song Liang told the first financial reporter that under the condition of temporary oversupply, domestic raw milk prices are expected to further decline in 2023, and whether the industry can improve depends on the recovery of downstream dairy consumption.

　　At the Netease New Energy Dairy Industry Summit held recently, Zhao Hui, general manager of Baidu Consumer Index Northern District, predicted that according to the experience of Europe, America and other Asia-Pacific countries and regions, China's fast-moving products including dairy products may be the first in 2023. It will start to pick up in the second quarter, and the process of high-end will continue.

　　However, according to many interviewees, if the market recovery during the Spring Festival falls short of expectations, the pressure on the raw milk industry will be even greater.

However, the industry is always repeating "yesterday's story" and continues the cycle of "lack of milk-increasing prices-raising cows-surplus-killing cows-lack of milk". Solve the problem.

　　(Xu Feng is a pseudonym in the text)