July 25, 2011

Shanghai Municipality's Development and Reform Commission has raised the price of raw milk, just three months after the municipal government's previous increase.

The benchmark price of raw milk (containing 3.2% fat and 2.95% protein) in Shanghai was raised to RMB3.74 (US$0.58)/kg from RMB3.59 (US$0.55)/kg, effective from July 1 till the announcement of the next adjustment.

Companies that manufacture or process raw milk can set their own prices within a floating range based on the benchmark price.

The increase is primarily attributed to rise in production costs associated with wage inflation and the higher prices of livestock feed, although its impact on Shanghai's dairy industry will be limited, said Wang Dingmian, chairman of the Dairy Association of Guangzhou.

Wang also indicated that it is against the market's supply and demand principles for Shanghai's municipal government to regulate raw milk prices. The newly-adjusted price is still relatively low, compared to Guangzhou's raw milk price range of RMB4.70-4.80 (US$0.73-0.74)/kg, he added.