September 21, 2007

Government subsidies spur confidence in China's dairy companies

Shares of China's dairy companies soared on Thursday (Sep 20) after the government announced plans to provide subsidies to dairy farmers.

Shares of Bright Dairy & Food Co. rose to its 10 percent daily limit to RMB 14.73 , while stocks of other dairy companies gained as well.

China's State Council agreed to offer subsidies to dairy farmers after rising feed costs and low milk prices prompted many to exit the business. Four out of ten farmers were losing money in the business, according to a Reuters estimate.

Although China's dairy industry has experienced explosive growth, fierce competition is forcing prices down, causing less efficient farmers to incur losses.