Abstract:In 2020, China’s dairy consumption demand will achieve the fastest growth in 15 years. Driven by both demand growth and rising costs, the price of fresh milk continued to rise in the second half of the year, and the annual average price increased by 3.8%year-on-year. The profitability of dairy farming has been significantly improved, with an average annual gross profit margin reaching 13.4%. The total import volume of dairy products for the year was 3.281 million tons, a year-on-year increase of 10.4%. The net import of dairy products is equivalent to 18.872 million tons of raw milk, and the milk-derived supply rate is 65.3%, which has fallen for five consecutive years, but the decline has narrowed for four consecutive years. Based on a comprehensive judgment, the pressure on the price of raw milk to adjust in 2021 will increase, the growth rate of consumption demand for dairy products may slow down, and the total volume of dairy products imports will still increase slightly. In order to speed up the upgrading and development of the dairy industry, efforts should be made to strengthen market stability and risk prevention and control mechanisms, continue to strengthen the construction of the industry chain benefit linkage mechanism, continue to promote the development of family ranches on the basis of standardization and standardization, and steadily promote the development of milk on the basis of quality and safety. Agricultural processing and other new formats and models of the dairy industry will accelerate the structural reform of the agricultural supply side and promote the cultivation of high-quality feedstuffs.
1 Features of China’s dairy economy development in 2020
1.1 Consumer demand for dairy products achieves the fastest growth in 15 years
If measured by the sum of the total domestic milk production and the total imported dairy products equivalent to raw milk, the total demand for dairy products in 2020 will reach 54.31 million tons, an increase of 8.0%compared with 2019. This is also 2006 It has been the fastest growing year for China’s dairy consumption demand. According to data from the National Bureau of Statistics, the total national dairy product output in 2020 is 27.804 million tons, a year-on-year increase of 2.2%. In terms of varieties, the total output of liquid milk increased by 2.2%year-on-year, and the total output of dry dairy products decreased by 0.4%year-on-year. If consumption is measured by the sum of domestic production and imports, the annual consumption of liquid milk is 27.07 million tons, an increase of 2.9%year-on-year, which is 0.8 percentage points higher than the year-on-year growth rate (2.1%) in 2019. In 2020, the production and import volume of dry dairy products totaled 4.019 million tons, an increase of 4.0%year-on-year, an increase of 0.8 percentage points higher than the 3.2%in 2019.
1.2 The price of raw milk first dropped and then rose, and the domestic and international price gap has widened
In recent years, domestic fresh milk prices have shown a trend of first falling and then rising. There is a relatively obvious seasonal correction in the first half of each year (Figure 1-A). In 2020, the price of fresh milk will continue to continue this trend, and it will be similar to the trend in 2019, that is, the price decline lasts for a shorter period of time, and the price rises more. According to the monitoring data of the Ministry of Agriculture and Rural Affairs on the purchase price of fresh milk in the main producing provinces, the annual average price of fresh milk in 2020 is 3.79 yuan/kg, which is 3.8%higher than that in 2019 (3.65 yuan/kg). Specifically, the average price of fresh milk in January 2020 is 3.84 yuan/kg, which is 6.4%higher than the price in the same period in 2019 (3.61 yuan/kg). Since February, the price of raw milk has continued to fall, and in May it dropped to an annual low of 3.57 yuan/kg. In June, the price of fresh milk began to rebound and continued to rise. In December, it reached 4.15 yuan/kg, which was 8.1%higher than the price in the same period in 2019 (3.84 yuan/kg), creating the highest price since 2015. The change trend of the purchase price of fresh milk of nearly 200 domestic farms monitored by the National Dairy Industry Technology System is basically consistent with the monitoring results of the Ministry of Agriculture and Rural Affairs, which dropped from 3.97 yuan/kg in January to 3.63 yuan/kg in April. It rebounded and rose to 4.16 yuan/kg in December. In general, the price monitored by the national dairy industry technology system is higher than the price monitored by the Ministry of Agriculture and Rural Affairs in the same period, but the gap between the two in 2020 is significantly smaller than in previous years. In 2020, the monthly monitoring price of the national dairy industry technology system is 0.09 yuan/kg higher than the agricultural and rural monitoring price on average, and the price difference is 49.4%lower than that in 2019. The national dairy industry technology system monitors a larger average scale of pastures, which can obtain better sales prices than small and medium-sized pastures, but this advantage has been reduced under the tight supply and demand of raw milk.
Judging from the comparison of domestic and foreign prices, the purchase price of domestic fresh milk in 2020 will still be higher than the imported milk powder equivalent to the CIF price of raw milk, and the price of domestic fresh milk will rise sharply in the second half of the year, and the ratio of the two will rebound sharply ( Figure 1-B) The gap in the competitiveness of the domestic and international dairy industry has widened. In 2020, the average price of fresh milk in the main producing provinces monitored by the Ministry of Agriculture and Rural Affairs is 3.79 yuan/kg, and the average CIF price of imported milk powder equivalent to raw milk is 2.91 yuan/kg, which is 30.2%higher than the latter. The ratio of the purchase price of domestic fresh milk to the CIF price of imported milk powder equivalent to raw milk continued to drop from 1.39 in January to a low of 1.12 in May, but the ratio rose to 1.50 in December.
1.3 The rising feed price drives the rapid growth of production costs, and the increase in breeding income is limited
According to the monitoring data of the National Dairy Industry Technology System, the unit production cost of fresh milk in large-scale ranches has entered a downward channel since September 2014 after years of growth, but has shown a fluctuating upward trend since the second half of 2018 (Figure 2 -A). In 2020, the total cost per kilogram of raw milk decreased first and then increased. It dropped from 3.37 yuan in January to 3.29 yuan in April and then stopped falling and rose, and rose to 3.46 yuan in December. The total unit cost during the period from April to December An increase of 5.2%. In 2020, the average total cost per kilogram of raw milk is 3.36 yuan, 1.2%higher than the 2019 average. There are many reasons for the overall increase in the unit cost of fresh milk in 2020 and the rapid growth after April:First, during the prevention and control of the new crown pneumonia epidemic, all regions have implemented strict controls on road traffic and personnel movement, and farms generally face insufficient input supply and labor shortages. Problems such as feed procurement costs and labor costs rise. Second, domestic feed costs such as corn and soybean meal have risen sharply. According to the monitoring data of the Ministry of Agriculture and Rural Affairs, the prices of corn and soybean meal will both show an upward trend in 2020. From January to December, the price of corn will rise from 2.09 yuan/kg to 2.62 yuan/kg, an increase of 25.4%, and the price of soybean meal will rise from 3.25 yuan/kg to 3.46 yuan/kg, up 6.5%. Especially since April, the cost has increased rapidly, and the rising feed price is the main driving factor.
The profitability of dairy farming has improved to a certain extent after the continuous increase in the price of fresh milk. According to the national dairy industry technology system monitoring pasture data, the gross profit of raw milk production increased from 0.34 yuan/kg to 0.70 yuan/kg from April to December, and the gross profit rate increased from 9.4%to 16.8%. From the perspective of the ratio of the unit price of fresh milk to the unit cost, the ratio from February to July 2020 is lower than the same period in 2019. After July, the ratio will exceed the same. The annual average is basically the same as in 2019 (Figure 2-B). In 2020, the domestic milk-to-feed ratio will show a sharp decline first and then a slow rise. Although the gross profit margin of monitored farms has rebounded significantly, due to the simultaneous increase in milk prices and feed costs, the milk-to-feed ratio at the end of the year was only 1.45, which was still slightly lower than the ideal level of 1.50, which was 7.1%lower than the 1.56 at the end of 2019. The domestic milk-to-feed ratio is higher than the international average. In the international market, due to the drop in milk prices and the sharp increase in feed prices, the milk-to-feed ratio dropped rapidly, from 1.91, the highest in April, to 1.34 in November.
1.4 The import growth rate of dairy products slowed down, and the import volume of milk powder and infant formula milk powder declined
In 2020, the milk source feed rate will drop for the fifth consecutive year, but the self-sufficiency rate will shrink for the fourth consecutive year. According to national customs statistics, China’s total imports of dairy products reached 3.281 million tons in 2020, an increase of 10.4%year-on-year, and a decrease of 2.5 percentage points compared with the year-on-year increase in 2019; the import value was US$11.71 billion, an increase of 5.2%year-on-year (Table 1 ). The annual net import of dairy products was 3.238 million tons, equivalent to 18.872 million tons of raw milk, a year-on-year increase of 9.0%, 1.9 percentage points higher than the year-on-year increase in 2019. If the total national milk production in 2020 is calculated at 35.44 million tons, the milk source supply rate in China in 2020 is 65.3%, a decrease of 0.3%compared with 2019.
In terms of varieties, the import of dairy products in 2020 presents the following characteristics:① The import volume of whey and cream has increased significantly, with imports of 626,000 tons and 116,000 tons, respectively, with a year-on-year increase of 38.2%and 35.2%. ②The import volume of fresh milk and cheese also increased significantly. Fresh milk imports exceeded 1 million tons for the first time and reached 1.04 million tons, a year-on-year increase of 16.8%. The import volume of cheese was 129,000 tons, an increase of 12.5%year-on-year. ③The import volume of condensed milk dropped significantly, down by 31.6%year-on-year to 24,000 tons. ④The import volume of yogurt, raw milk powder and infant formula milk powder all declined slightly. The import volume was 32,000 tons, 979,000 tons and 335,000 tons, respectively, a year-on-year decrease of 4.9%, 3.5%and 3.0%. Milk powder imports fell for the first time since 2016, and infant formula milk powder imports fell for the first time in recent years.
In terms of origin, after equating to raw milk, 45.3%of China’s total dairy imports in 2020 will come from New Zealand, followed by the United States, accounting for 13.7%, and Australia ranking third, accounting for 6.6%(Figure 4). Due to the difference between the structure of imported products and the added value, there is a certain difference between the composition of the source of imports and the composition of the source of raw milk. In 2020, 53.5%of total imports came from New Zealand, Australia ranked second with 9.3%, and Germany ranked third with 6.7%. Calculated by the amount of raw milk, compared with 2019, the proportion of imports from various sources has increased by 5.5%, Belarus’s share has increased by 1.6%, and Poland’s share has increased by 1.4%. Others The growth rate of the countries (regions) that account for the growth is less than 1 percentage point. As an important source of China’s dairy products, the proportion of dairy products imported from the Netherlands and France in China’s total dairy products imports has dropped significantly, down 4.0%and 1.4%respectively. Ireland is the source of total imports in China. The proportion of China also dropped significantly, with a drop of 1.9 percentage points. The above changes in the composition of sources indicate that the Sino-US trade agreement has a significant impact on the source structure of China’s dairy imports.
2 Outlook on China’s dairy economy in 2021
2.1 Increased pressure on raw milk price callbacks
Considering factors such as domestic and foreign markets, production, and demand, the price of domestic fresh milk will be under greater pressure in 2020. In the international market, there may be a slight correction in the price of dairy products in 2021. At present, supply and demand in the international market are loose, milk prices are in a downward path, and may continue to fall. The further widening gap between domestic and international milk prices will also increase the downward pressure on domestic milk prices. According to data from the United States Department of Agriculture (USDA), at the end of 2020, the global average price of whole milk powder (WMP) was US$3,377.63/t, a year-on-year decrease of 4.08%. At the end of 2020, the global dairy product trading platform (GDT) WMP price dropped by 7.09%year-on-year. However, according to IFCN data, the global average milk-to-feed ratio is low, which will restrict global output growth. At the same time, global feed prices will continue to be high. These factors will inhibit the sharp drop in milk prices in the international market. Domestically, milk prices are also facing downward driving factors. Although the tight supply and demand relationship of domestic milk sources will not be eased for the time being, the impact of dairy farming investment on the supply and demand relationship in the past year will begin to gradually appear. At the same time, consumption demand for dairy products in 2021 lacks the momentum for rapid growth, and even faces downward pressure due to the decline in pork prices. As feed supply and demand tensions and high prices will continue, the sharp correction of fresh milk prices will also be suppressed. However, the income of dairy farming in 2021 may be low. Based on the above factors, the milk price will be adjusted seasonally in the first half of 2021, and the correction will be smaller than that in 2020. The price recovery momentum in the second half of the year will be insufficient, and the annual milk price will be lower than the 2020 level.
2.2 The growth rate of consumer demand for dairy products may slow down
The rapid growth of consumer demand in 2020 is an important driving force for the development of the industry and the maintenance of high milk prices. However, the growth rate of China’s dairy consumer demand in 2021 is likely to slow down. First of all, China’s economic growth rate in 2021 will still be subject to large uncertainties, which will be affected by factors such as the new crown pneumonia epidemic at home and abroad and international economic and trade relations. Second, it is expected that in the first half of 2021, the production capacity of live pigs will return to the normal level of previous years, and the price of pork will also drop significantly. The decline in pork prices and the increase in pork consumer demand will put downward pressure on the price of dairy products and will also restrain the growth of demand for dairy products. .
2.3 Total imports of dairy products will continue to increase slightly
The growth rate of consumption demand for dairy products in 2020 has slowed down compared to 2019, but the growth rate of domestic raw milk production hit a new high in recent years, reflecting the increasing competitiveness of the domestic dairy industry. On the one hand, with the improvement of the domestic dairy quality management system and the enhancement of the competitiveness of domestic dairy brands, consumers’ confidence in the quality of domestic dairy products and their preference for domestic dairy products will continue to increase, and the growth of domestic consumer demand will More embodied in the pull of domestic production. On the other hand, the growth of various diversified, distinctive, and localized consumer demand will also be more satisfied by stimulating domestic production. At present, the ratio between the purchase price of domestic fresh milk and the price of imported milk powder has risen sharply. In 2021, the international milk price will further decline, which will put pressure on imports. However, the increase in domestic supply, the slowdown in the growth of the total demand for dairy products and the domestic milk All price corrections will have a certain inhibitory effect on import growth. On the whole, imports of dairy products may still increase slightly in 2021, but the year-on-year growth rate will drop significantly.
3 Ideas and suggestions for accelerating the upgrading and development of the dairy industry
3.1 Strengthening the construction of market stability and risk prevention and control mechanisms
The new crown pneumonia epidemic in early 2020 has had a huge impact on the development of the industry, highlighting the need to strengthen market stability and risk prevention and control mechanisms. In the context of increasing uncertainty in the economic and trade relations inside and outside the industry and at home and abroad, This issue is even more important. To this end, first, we must strengthen the construction of a market monitoring and early warning system, focusing on monitoring domestic and foreign macroeconomics, industrial policies, economic and trade relations, major dairy cattle epidemics and other major events, as well as dynamic information on the purchase and sale of raw milk, feed processing and inventory, and dairy products trade. Timely discover major risk factors that affect the development of the industry and large fluctuations in the industry, and evaluate the impact of risk factors and market fluctuations on the development of the industry. Second, it is necessary to establish a policy-based reserve system for dairy products. At present, a reserve of raw milk powder can be established, and the short-term fluctuations in the price of raw milk can be suppressed through the collection and release of the reserve. At the same time, the policy reserve of dairy products can be connected with the policy nutrition supplement plan to avoid excessive accumulation of reserves. The third is the establishment of an industrial stability fund jointly funded by the government, enterprises and dairy farmers. When facing major shocks, it is mainly used to support the financing needs of liquidity funds of farmers.
3.2 Continue to strengthen the construction of the industry chain benefit linkage mechanism
The profitability of dairy farming will improve to some extent in 2020, but this round of raw milk price increase and dairy farming income increase are not supported by the reform and construction of the interest linkage mechanism of the dairy industry chain. Once the supply and demand relationship of raw milk is eased, coupled with the adjustment of feed prices and the squeeze of international low-priced imported products, the price of raw milk will still face greater downward pressure, which is also a major threat to the development of China’s dairy industry in 2021. In the near to mid-term, how to improve the distribution position of the dairy industry in the dairy industry chain and consolidate the foundation of dairy farming remains a major issue for the development of China’s dairy industry. First of all, the key is to improve the price formation mechanism, focus on improving the level of organization of dairy farmers, give play to the role of dairy farmer organizations in the formation of raw milk prices, and improve the overall bargaining power of dairy farmers through the establishment of a collective bargaining system, and reduce disorderly and excessive competition. The magnification of market fluctuations allows dairy farmers to share more of the value-added benefits in the process of industrial development. Secondly, it is necessary to accelerate the advancement of the third-party inspection system for raw milk to ensure the consistency and stability of standards and the objective and fairness of the results, to avoid quality inspection as a tool for price discrimination, and to make third-party inspections the quality and safety of China’s dairy industry and China’s dairy brands. endorsement.
3.3 We must continue to promote the development of family farms on the basis of standardization and standardization
The development of family ranches is the need to improve resource utilization efficiency and reduce environmental costs. It is a common experience in the development of the international dairy industry, and it is an inevitable requirement to adhere to the basic management system of China’s rural areas. To this end, first, we must restructure the dairy industry support policy system based on the development of family pastures, especially the support and subsidy policies related to dairy farming. The orientation of family ranches does not deny or inhibit the development of large-scale ranches and corporatized ranches, but avoids supporting policies that favor large-scale grazing and corporatized ranches. The current tendency to support large-scale pastures and corporatized pastures has strengthened its advantages in financing and policy resource acquisition, which is an important reason why family pastures are difficult to develop. Second, we must improve the production system, management system and industrial system based on the development of family farms, focus on strengthening the construction of the socialized service system of dairy farming technology, solve the shortage of dedicated human capital in family farms in breeding and disease management, and accelerate family farm technology Progress; strengthen the construction of dairy farmer cooperative organizations in accordance with the requirements of the trinity of production, purchase and sale and financial services, solve the problems of scale economy and financing constraints at the management level of family ranches; build a collection, storage, and transportation service system and third-party testing that are compatible with the development of family ranches The establishment of systems and other aspects will improve the efficiency of raw milk purchase and transportation of family farms. Third, we must take a multi-pronged approach to improve the level of manure treatment and resource utilization of family farms, including:promoting the development of conditional family farms to the combination of planting and raising, and the integration of planting and raising, realizing the reasonable return of manure to the field nearby; strengthening research and development, Provide economical and applicable manure treatment technology and solutions for family farms; promote the agglomeration of upstream and downstream industries according to the concept of circular economy, and realize the centralized treatment and resource utilization of manure. Fourth, we must deepen the reform of the farmland system with the focus on the allocation and protection of farmland management rights. By stabilizing farmland management rights, we will promote long-term investment by farmers and improve the standardization level and equipment technical conditions of family farms.
3.4 On the basis of quality and safety, steadily promote dairy farmer processing and other new formats and models of dairy industry
The development of dairy products processing by dairy farmers is conducive to cultivating fresh milk consumption demand and meeting consumers’ demand for high-quality, differentiated and personalized dairy products, thereby promoting the transformation of dairy consumption patterns and consumption structures. On the one hand, it is beneficial to enhance the distribution status of dairy farmers in the dairy industry chain and the basic status in the development of the dairy industry. Ensuring quality and safety is the red line for dairy farmers in processing. First of all, from the perspective of quality and safety, the access conditions, quality standards and audits of dairy farmer processing must be strictly controlled. Secondly, it is necessary to construct a comprehensive industrial chain covering production, processing and consumption and all key links in accordance with the various business models of dairy farmer processing. The quality inspection and supervision system resolutely prevents any unqualified raw milk from entering the processing and consumption links. Third, strengthen the exit mechanism. Any processing farm that violates regulations or exposes hidden risks must be resolutely revoked or suspended related processing licenses, forcing the processing farms to develop with higher standards and truly become the leader of industrial upgrading. The spokesperson for the quality and safety of China’s dairy industry.
3.5 Accelerate the structural reform of the agricultural supply side and promote the cultivation of high-quality forage grass
China’s agriculture is facing outstanding structural imbalances. One of the important aspects is the shortage of feed grains. The sown area of green fodder accounts for less than 2%of the total sown area of Chinese crops for a long time; the sown area of green fodder plus corn forage accounts for about 18%of the total sown area of crops, which is significantly lower than that of livestock and aquatic products. Percentage of food consumption. In 2020, the price of feed inputs such as corn has risen sharply, bringing serious challenges to the stable production and supply of important agricultural products such as milk, which highlights the shortage of feed grains. To this end, it is necessary to accelerate the advancement of agricultural supply-side structural reforms, in accordance with the requirements of rebalancing the production structure and the demand structure, speed up the implementation and coverage of the “grain-to-forage” policy, promote the planting of forage maize, especially silage maize, and strengthen The research and development of special corn varieties for silage will increase the supply of short-term and ultra-short-term silage varieties in high-latitude areas, and improve the high efficiency, stress resistance and applicability of special silage varieties for mechanized operations.