China’s domestic dairy producers suffer from low demand, foreign competition

BEIJING - Several of China’s major raw-milk producers reported losses in the first half of 2016 amid lukewarm demand and intense competition from foreign milk-powder suppliers. A Caixin report says China’s largest milk producer by output, China Modern Dairy Holdings Ltd., lost RMB566 million (US$ 84.7 million) in the first half, its first loss since it went public on the Hong Kong exchange in 2010.

Sales were down 8% from the same period last year, the company said. During the first half, "a large number of small-scale farms exited the market, while excess supply of raw milk was seen in some large-scale farms, with a declining trend in profitability", China Modern Dairy said in its earnings report.

YuanShengTai Dairy Farm Ltd., another Hong Kong-listed company, lost RMB136 million in the first six months. Shenzhen-listed Xinjiang Western Animal Husbandry Co. Ltd. reported a loss of RMB26.7 million, its first time in the red in the past six years.

China's thirst for milk had weakened amid the economic downturn, dragging down raw milk prices, experts said. The price of raw milk started to decline in mid-2014 after two years of rapid growth and stood at RMB 3.4 per litre as of the end of July, according to Sinolink Securities.

Some dairy farmers in Shandong and Shaanxi provinces had resorted to dumping milk and even killing dairy cows after prices started to dip.  www.webershandwick.cn (ATI).