How do we deal with the new round of low global dairy prices?

The global auction price of dairy products has continued to decline since March 2015, and the global auction price of milk powder fell sharply in July. Similar to the price trend in the futures market, the spot price of milk powder in the international market has also declined continuously since April this year. The collapse of dairy prices in the international market has led to a decline in the global purchase price of raw milk, and the farming efficiency of dairy farmers in the main dairy producing countries has been seriously damaged. According to the International Ranch Federation (IFCN), in June 2015, the global purchase price of raw milk was US $0.287 per kilogram, or 1.75 yuan per kilogram, down 5.6 percent from the previous month and 35.7 percent from the same period last year, the lowest price since December 2006.

Although the current monitoring data of the Ministry of Agriculture show that the purchase price of raw milk remains at 3.41 yuan per kilogram in July, considering the purchase measures of dairy enterprises such as "limited quantity" and "quantitative", the actual purchase price of raw milk should be much lower than this price. the purchase price of raw milk in Shaanxi, Gansu, Ningxia and other areas has fallen below the cost price, and the breeding benefit of dairy farmers is not optimistic. With the continuous decline of breeding efficiency, the phenomenon of "pouring milk and selling cattle" continues in some places at present.

In order to cope with the increasing market demand in China, New Zealand, Australia and other countries have expanded their dairy production in recent years, coupled with better climatic conditions in the 2014 / 2015 season, raw milk production in the world's major dairy producing countries is better than expected. According to statistics, from January to May 2015, New Zealand produced 8.283 million tons of raw milk, an increase of 0.8 percent over the same period last year; Australia produced 3.594 million tons of raw milk, up 2.99 percent over the same period last year; the United Kingdom produced 6.2181 million tons of raw milk, an increase of 1.20 percent over the same period last year; and the United States produced 39.9284 million tons of raw milk, an increase of 1.65 percent over the same period last year.

Slowing demand in China and an extended ban on Russian imports have made it difficult to boost global milk prices. The proportion of China's milk powder imports in the global milk powder trade volume is more than 1 to 5, and its demand changes directly affect the price of milk powder in the international market. In the past two years, excessive import of milk powder has directly led to an increase in the inventory of domestic dairy enterprises, while domestic dairy consumption is weak and the speed of destocking is slow. In the first half of 2015, domestic raw milk production increased by about 6%. Domestic dairy enterprises acquired surplus raw milk for powder spraying, and the number of imported milk powder dropped sharply. According to customs statistics, from January to June 2015, China imported 344000 tons of milk powder, down 49.52 percent from the same period last year. In addition, Russia, a major importer of dairy products, stopped importing dairy products from sanctions countries in August 2014, and the ban may be extended in 2015, curbing demand for dairy products in the international market to some extent.

Against the backdrop of the global economic downturn, the decline in the exchange rates of the New Zealand dollar and the Australian dollar has exacerbated the decline in global milk prices. In recent months, due to the collapse of iron ore prices in the international market and other factors, the Australian economy continues to be weak, and the exchange rates of the Australian dollar and the New Zealand dollar continue to fall. The continued weakness of the Australian and New Zealand dollars against the US dollar has exacerbated the decline in global dairy prices as the bidding prices of dairy products in the international market are settled in US dollars.

The price insurance mechanism of raw milk should be established to cope with the impact of the international market.

IFCN predicts that international milk prices will enter the downward channel in the next five years, that is, China's dairy industry will face long-term competition from international cheap dairy products. In this regard, measures should be taken to alleviate the impact of falling milk prices in the international market on the domestic dairy market:

In the short term, it is suggested to stabilize domestic dairy supply and demand by stimulating domestic dairy consumption demand, strengthening reduced milk label management, establishing price risk linkage mechanism between dairy enterprises and dairy farmers, and starting the national milk powder collection and storage plan. First, actively promote the nutritional value of pasteurized milk and yogurt, encourage the consumption of low-temperature milk, and strive for space for the domestic demand for fresh milk. Second, through nutrition intervention measures, promote the food consumption of urban and rural special groups and low-income groups, reduce processing and circulation costs, and expand the consumption of livestock and poultry feed such as suckling pig powder. Third, strictly implement the reduced milk labeling system, achieve traceability of channels and uses of imported dairy products, and reduce the excessive demand of enterprises for imported milk powder from the source. The fourth is to implement the national milk powder reserve plan and consider subsidizing and supporting enterprises by the way of "replenishment and storage", so as to alleviate the inventory pressure of enterprises and the corresponding shortage of liquidity.

In the long run, it is necessary to consider this round of dairy market fluctuations as a breakthrough, adjust and optimize the industrial structure, establish a price insurance mechanism for raw milk, stabilize domestic and foreign market expectations by "fixing production on demand", and make a good policy reserve for the construction of China's dairy safety net. First, to improve the level of per unit yield as a breakthrough to reduce production costs and improve industrial efficiency. The second is to establish an insurance mechanism for the price of raw milk, the government subsidizes the premium, and the insurance company supports the price of raw milk to help farms avoid market risks. The third is to explore the risk-sharing mechanism between dairy enterprises and dairy farmers. the government, dairy enterprises and dairy farmers jointly raise funds to set up a milk price risk fund. When the fluctuation of milk price is too large, the risk fund will be used to subsidize dairy enterprises and dairy farmers. The fourth is to do a good job in the research on supply and demand in the domestic market, accurately judge the gap between supply and demand of domestic dairy products, and stabilize the expectations of domestic and foreign markets.