July 16, 2025

 

China's raw milk industry could take one year to recover from falling prices

 

 

The raw milk industry in China has bottomed out after undergoing a thorough adjustment with continuously declining prices over the past three years, with its recovery likely to take around one year, according to industry professionals.

 

The domestic milk sector has been focused on its adjustment trajectory since late last year, with widespread expectations of a changing point this year, experts said at the 2025 China Dairy Development Strategy Seminar held by the Dairy Association of China.

 

However, the average price of fresh milk fell 6.5% to ¥3.04 (US$0.42) per liter in 10 major production regions, including Inner Mongolia Autonomous Region and Hebei province, in the first week of this month from a year earlier, showing no signs of recovery, according to data from the Ministry of Agriculture and Rural Affairs.

 

The milk sector has reached the trough phase of the current cycle, but a turnaround will require about one year, noted Li Shengli, chief scientist at the National Dairy Industry Technology System.

 

Domestic dairy companies' spray drying improved in April from a year ago, according to the National Dairy Industry Technology System. By mid-May, the daily volume of milk used for spray drying in China dropped to between 5,000 tonnes and 6,000 tonnes, a clear sign of bottoming out.

 

However, upstream capacity reduction remains critical, Li noted, adding that government subsidies alone cannot fundamentally resolve the issue, with the industry needing a better structure to achieve a supply-demand balance.

 

The dairy consumption market remains in a slump, and the pace of upstream capacity reductions will determine whether supply and demand rebalance, added Song Liang, an independent dairy analyst.

 

China's milk industry has long grappled with cyclical and seasonal supply fluctuations, facing a dual dilemma of "higher cattle farming prices — surplus triggering price drops — reduced slaughter costs" and "milk shortages in peak seasons and surplus during off-seasons," the experts said.

 

Since 2000, the milk sector has undergone three major cycles, with price volatility exceeding 60% during each. The domestic dairy farming market losses have topped ¥70 billion (USD9.8 billion) from 2023 to this year.

 

Due to such losses, the industry is reevaluating its development model, with the Key Studies on China Dairy Strategic Development report released at the seminar proposing adopting the United States' model, including strengthening the role of agricultural authorities and industry organisations in macroeconomic planning and supply-demand management. In addition, a raw milk pricing system that reflects consumption trends and safeguards farmers' interests should be set up to mitigate cyclical volatility.

- Yicai Global