China Milk insights

China's milk supply glut will persist in the first half of next year, with efforts by Chinese regulators expected to normalize in the second half, the Ministry of Agriculture and Rural Affairs predicts.

Since the beginning of this year, affected by factors such as increased domestic raw milk supply, sluggish dairy product consumption, and continued downward trend in milk prices, the city's dairy industry has faced multiple difficulties, including a quarterly decline in the number of dairy cows in stock, an inverted cost of raw milk, and loss-making operations on the breeding side. The Municipal Finance Bureau actively cooperated with the Municipal Agriculture and Rural Department to go deep into breeding companies and dairy companies to diagnose the city's dairy industry, and promptly implemented a series of powerful measures such as the subsidy policy for the comprehensive utilization of crop straw (corn silage feed), providing "real money" support for dairy farming companies, promoting the stable and healthy development of the dairy farming industry, and ensuring the stable production and supply of the "vegetable basket". Silage is the "food" for dairy cows throughout the year. The annual storage of silage requires a large amount of funds from the farm. In order to effectively alleviate the financial pressure of dairy farming enterprises, the Municipal Finance Bureau actively raised funds to subsidize the "cellar storage" of silage corn in large-scale dairy farms (cooperatives) in 2024 at a rate of 40 yuan per cubic meter. According to the forecast of the agricultural and rural departments, the city's dairy farming will need to store a total of 700,000 cubic meters of silage corn in 2024, and it is estimated that about 28 million yuan of subsidies can be issued. At the same time, we will continue to implement support measures such as improving the capacity of dairy business entities and interest subsidies for facility agriculture loans, continuously improve production facilities, and promote cost reduction and efficiency improvement. In the next step, the Municipal Finance Bureau will work with the Municipal Agriculture and Rural Department to further strengthen supervision and service measures to ensure the implementation of policy measures such as subsidies for the comprehensive utilization of crop straw (corn silage), effectively help dairy companies overcome difficulties, and support the stable and healthy development of the industry.

The average value of the FAO Dairy Price Index in October was 139.1 points, which is 2.5 points (+1.9%) higher than the September figure and 24.5 points (+21.4%) higher compared to October 2023 (Chart 1). World cheese prices increased the most due to limited supply, especially in EU member states, where there is a seasonal decline in milk production. World butter prices also increased, due to high demand and a seasonal decline in milk production in Europe. Prices for powdered milk decreased due to a seasonal increase in milk production in Oceania and sluggish world import demand. Figure 1. FAO Dairy Price Index Source: AVM study based on FAO data. According to clal.it, in January-September, milk production in the EU increased by 0.4% compared to the same period last year and amounted to 111.11 million tonnes (Figure 2). This year, the countries of Central and Eastern Europe have been hit by the