Feeding fresh milk to pigs the "diseases" behind the cold spell of the global dairy industry

Fresh milk has been fed to pigs in some parts of China, while the global dairy industry has encountered a "worldwide cold spell" at the same time.

This round of global dairy overcapacity and prices are getting lower and lower, which is rare in the past 10 years, and the reasons behind it are worth analyzing.

1. As far as China is concerned, according to the data of the National Bureau of Statistics, the total sales of liquid milk in 2015 was 27.389 million tons, an increase of 3.6% over the previous year. However, compared with the average annual growth rate of 5.1% during the 12th five-year Plan period and 11.1% during the Eleventh five-year Plan period, the growth rate is obviously on the low side.

The slowdown in consumption growth is an important reason for the decline in raw milk prices. Domestic consumption of liquid milk, mainly domestic milk sources, the slowdown in this part of the growth rate is indeed a serious impact on the upper reaches of the dairy industry. At the same time, the confidence of domestic milk consumption is still in the repair stage.

2. Obviously, this interpretation has its defects. If our consumers' confidence in domestic milk is still insufficient, how can we explain the sluggish global dairy industry? Generally speaking, dairy consumption is still relatively rigid, if people buy less domestic milk, imported milk consumption should be greatly increased, and the global dairy market should benefit. But this is not the case. The price of domestic milk sources is declining, and so is the international market.

The underlying problem may be that global raw milk production capacity is too large.

Before 2013, the Chinese market was extremely booming, which spurred major milk-producing countries to expand production capacity. It also happened that around that year, many Chinese companies hoarded goods, and then global milk prices fell. Not only the major milk source countries and foreign enterprises actively layout raw milk production capacity, a few years ago, Chinese dairy giants also stepped out. The degree of scale of dairy farming in foreign countries is higher, the quality of pastures is also relatively better, and the price of imported milk is generally lower than that in China.

3. Not only international overcapacity, but also the Ministry of Industry and Information Technology and the Ministry of Agriculture strongly supported the development of domestic dairy industry and the merger and reorganization of enterprises a few years ago, which may lead to accelerated investment in domestic farms, especially many super-large "Wantou farms". Now the price drop also reflects the problem of overcapacity.

4, the price of agricultural products generally has a natural cycle, the so-called cobweb theory, price decline is also a normal phenomenon.

It is worth noting that according to the fixed-point monitoring of the Ministry of Agriculture, the loss area of dairy farming reached 51% in March, an increase of 5.8% over the same period last year; at the same time, the stock of dairy cows decreased by 11.9% compared with the same period last year. To make matters worse, the situation continues and spreads. So that the dairy industry has been listed as a "high-risk industry" by some banks. The reduction of domestic stock column is not all a bad thing, and it is also the case in the upstream production of international raw milk-when the stock column is reduced to a certain extent, the balance between supply and demand will be restored, which is conducive to the rebound of raw milk prices.

5. It is worth pointing out that so far, the global economy has lost its way forward and has not returned to medium-to-high-speed growth. So, on the demand side, the problem of sluggish growth in global dairy consumption is likely to continue for some time. Of course, the biggest variable may be our country.

In terms of per capita dairy consumption, China is still far lower than the major developed countries. With the change of living standards and habits, including the gradual upgrading of consumption, there is still a lot of room for growth in the demand for dairy products in China.

It is conceivable that if there are no accidents, China will still be in the process of medium-and high-speed urbanization in the next 20 years or so. Relatively speaking, the consumption of dairy products in urban areas is much higher than that in rural areas. In fact, even in China's rural areas, the growth of dairy consumption has obviously shown a trend of acceleration in recent years, and these factors will be good for the dairy industry in the long run.