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Why does dairy farming not develop well?

Posted on: July 24, 2019, by Victoria

As an important animal husbandry base in China, Tongliao City, the Inner Mongolia Autonomous Region, has vigorously developed dairy farming in recent years. The quantity and scale of standardized farming have made considerable progress, and the quality of raw milk has been greatly improved. However, at this stage, under the double pressure of the impact of the international market and the gradual saturation of domestic effective demand, the purchase price of raw milk continues to be depressed, which makes the dairy industry in Tongliao City enter the era of low profit, and it is difficult to form a cattle market.

Income Enters the Era of law Profit

The dairy farming industry is developing intensively.
In recent years, Tongliao City has earnestly taken the development of the dairy industry as one of the leading industries to promote the adjustment of agricultural and animal husbandry industrial structure and rural economic structure and increase the income of farmers and herdsmen and has made gratifying achievements. In 2016, there were 416 dairy farmers in Tongliao City, including 46 dairy farms (dairy village) with more than 100 cows. The dairy farming industry is gradually moving towards a high standard and intensive direction.

The withdrawal of dairy stations and individual farmers from the farming market is serious.
With the poor market of fresh milk, the continuous improvement of dairy enterprises 'acquisition standards, and the declining benefits of dairy farming, the withdrawal of dairy stations and individual farmers in Tongliao City is serious. According to the data of the Tongliao Dairy Association, there were more than 160 dairy stations of various types in 2012. So far, only 50 dairy stations have been operated. At the end of 2011, there were 4654 dairy individual farmers. By the end of 2016, there were only 400 dairy individual farmers, and more than 90% of them had withdrawn from the market.

The cost of raising cows has fallen slightly.
In 2016, with the abolition of the national policy of corn grain storage, domestic corn prices fell sharply, by more than 30% compared with the same period last year. Affected by this, the cost of farming fell slightly. According to the farmer's estimation, the cost of milk production of dairy cows is about 3.1-3.2 yuan per kilogram, and the decrease of corn price reduces the cost of milk production of dairy cows by 0.1-0.2 yuan per kilogram.

The benefit of dairy cow farming declined sharply.
Despite a slight drop in feeding costs, the persistent slump in milk prices, limited acquisitions by acquisition firms and the absence of market value in the dairy market have undoubtedly made the drop in feeding costs meaningless. At present, the purchase price of fresh milk in Tongliao City is 3.5-3.8 yuan/kg, which is about 7% lower than that of 4 yuan/kg in the same period in last year.

The acquisition of fresh milk is limited.
At the beginning of 2017, the acquisition enterprises carried out a limited purchase of raw milk in Tongliao City, that is, the acquisition enterprises only purchased 80% to 90% of the original supply of fresh milk for each farmer every day, and the remaining 10% to 20% of fresh milk for each farmer to deal with. According to the daily standard supply of 5 tons of fresh milk for each farmer, 0.5-1 tons of fresh milk need to be processed by the farmer. The raw milk is either sold to retail farmers at a low price of 1.8-2 yuan/kg or fed to calves. According to the farmer's calculation, the implementation of the limited policy is equivalent to a disguised reduction in the purchase price of raw milk by 0.2-0.3 yuan per kilogram.

Aquaculture income of farmers has entered an "era of low profit". 
At present, the profit of farmers is only 0.5 yuan/kg. If the dairy farm with 5 tons of fresh milk per day is taken as an example, the scale of farming is generally about 450 heads, and the investment is nearly 10 million yuan. The annual profit is only 900,000 yuan. If the cost of farming during the dry period, raising calves and depreciation of fixed assets is deducted, the actual profit will be about 500,000 yuan.

Challenges in the development of the industry

The fierce impact of the international market.
According to the report of the Ministry of Agriculture, China's dairy imports in 2016 totaled 195.56 million tons, an increase of 21.4% year-on-year. Among them, yogurt imports reached 21,000 tons, year-on-year growth of 104.3 %, while butter, milk powder, and other imports grew by more than 10%. All imported dairy products are converted into raw milk of about 15 million tons, which is more than 30% of the national demand for milk. According to the average yield of domestic lactating dairy cows of 6 tons per year, the converted raw milk from imported dairy products is equivalent to the annual milk yield of 2.5 million lactating dairy cows.

According to the report of the Ministry of Agriculture, China's dairy imports in 2016 totaled 195.56 million tons, an increase of 21.4% year-on-year. Among them, yogurt imports reached 21,000 tons, year-on-year growth of 104.3 %, while butter, milk powder, and other imports grew by more than 10%. All imported dairy products are converted into raw milk of about 15 million tons, which is more than 30% of the national demand for milk. According to the average yield of domestic lactating dairy cows of 6 tons per year, the converted raw milk from imported dairy products is equivalent to the annual milk yield of 2.5 million lactating dairy cows.

Effective demand in the domestic market tends to be stable.
At present, the demand for dairy products in the domestic market is in a dilemma. On the one hand, it is difficult to improve the demand of urban residents. Because of the high degree of recognition of dairy products, urban residents consume a large number of dairy products. However, the demand for urban residents for dairy products is saturated and can not be expanded in the short term. On the other hand, the demand for rural residents is difficult to mobilize. Because of dietary habits and living standards, the demand of rural residents for dairy products has been showing a tepid trend, which is difficult to change in the short term.

Imported dairy products are highly competitive.
On the one hand, because most of the developed countries in the dairy industry are sparsely populated, it is very suitable for the development of large-scale pasture farming, and the government has many preferential policies for large-scale pasture farming, which makes the dairy industry have obvious competitive advantages. According to industry estimates, as the current market situation of fresh milk, the profit and loss point of the domestic dairy farming industry is 6 tons of dairy cows per year. It is also the profit and loss point of the dairy farming industry, with only 4 tons abroad. Therefore, it is difficult for the domestic dairy industry to be competitive.

The reputation of the domestic dairy industry still needs to be improved.
After the melamine incident in 2008, the domestic dairy industry suffered a heavy blow, and consumers' confidence in domestic dairy products fell into a low ebb. At present, the domestic dairy industry is facing major challenges. Eighty percent of the new consumption is occupied by imported products. At the same time, the growth rate of domestic dairy consumption has slowed down. According to relevant statistics, the import of milk powder in China has surged from 90,000 tons in 2007 to 900,000 tons in 2014, an increase of more than 10 times. Judging from the market share of infant milk powder, 45% of the domestic milk powder market is a national brand, 40% is an international brand, and the remaining 15% is in the oversea market, which means that the most stringent policies have not completely restored consumers’ confidence.

Promoting development by taking multiple measures at the same time

Integrate resources to improve the competitiveness of dairy products. At present, the price of raw milk in China is higher than that in the world, mainly because of the rising cost of feed and labor. In the current domestic reality, limited by land carrying capacity and resource bottlenecks such as water and forage, the cost of dairy farming in China can not be as low as that in countries rich in natural resources. Only by improving the supporting facilities and establishing a moderately large-scale and intensive dairy farming in China, the price of raw milk will be in the future in the international arena. Only in this way can we have a comparative competitive advantage.

Strengthen publicity efforts to increase the consumption of dairy products among residents.
In 2015, the annual consumption of family milk and dairy products for all residents in Tongliao City was 10.77 kg/person, while the annual consumption of family milk and dairy products for all residents in the whole district was 21.94 kg/person in the same period. The per capita intake of milk and dairy products in Tongliao City was only 49.1% of the whole area. The low intake of milk and dairy products for residents directly restricted the amount of fresh milk purchased by the acquired enterprise. Therefore, the government should increase propaganda efforts to make more residents realize the nutritional value of dairy products.

Farmers are encouraged to further process dairy products and increase the added value of products.
Although there is still room for profit for every dairy farm (community) at this stage, the government and farming institutions should have a forward-looking to the market, and improve the ability to resist external risks by accurately grasping the market. As an important animal husbandry base in China, Tongliao Municipality should firmly grasp the honorary brand of dairy products. By lowering the entry threshold of dairy products, guiding and encouraging farmers to carry out deep processing of dairy products, changing the traditional mode of fresh milk supply, to improve the added value of products.

Make full use of the advantages of the location to sell local dairy products.  
Tongliao City, as the central area in the eastern part of the autonomous region, is a transportation hub linking the eastern Mongolia region with the northeast and even the Beijing-Tianjin-Hebei region. Therefore, we should seize this advantage and push Tongliao dairy products with high quality and good price to the whole country. Besides, it is necessary to communicate with well-known domestic food processing enterprises to set up their factories in Tongliao. Through the development and expansion of local brands and the introduction of well-known brands, the marketing channels of fresh milk will be broadened to ensure the healthy development of the dairy farming market.

Tongliao City, as the central area in the eastern part of the autonomous region, is a transportation hub linking the eastern Mongolia region with the northeast and even the Beijing-Tianjin-Hebei region. Therefore, we should seize this advantage and push Tongliao dairy products with high quality and good price to the whole country. Besides, it is necessary to communicate with well-known domestic food processing enterprises to set up their factories in Tongliao. Through the development and expansion of local brands and the introduction of well-known dairy cows, the marketing channels of fresh milk will be broadened to ensure the healthy development of the dairy farming market.

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