With nowhere to sell the milk, Chinese dairy farmers dump stocks, kill cows

Lower global prices have forced more farmers to quit the industry, with those remaining accepting lower prices

BEIJING: Slumping global milk prices have left Chinese dairy farmers few options but to dump unsold milk stocks and kill the extra cows, Xinhua reports on Saturday.

"A tonne of milk has to be discarded each day," dairy farmer Pei Shuke in east China's Shandong Province said. "This desperate thing rarely happened before."

Milk prices since the second half of 2014 have pushed many dairy farmers to desperation, and a long-term price mechanism is urgently needed to rescue farmers from their plight.

Unsold milk either thrown away or donated

"Unsold milk is discarded or donated to local nursing homes," said another anxious farmer, Cheng Meiyu.

Others are accepting lower prices of about 160 cents a kilogramme. Some still, have started to kill their cows.

China's Ministry of Agriculture (MOA) has warned such drastic measures are increasingly frequent as dairy processing companies cut or suspend the purchase of fresh milk.

Similar cases have been reported from major milk-producing areas such as Hebei, Inner Mongolia, Heilongjiang and Guangdong in China.

Wang Dingmian, former managing director of China's Dairy Association, said discarding milk and killing cows first started in 2009, and since over 100,000 farmers have quit the industry on an annual basis.

"But the situation became severe last year, and such incidents have even occurred in Guangzhou, one of the cities that lacks milk the most," Ding said.

Cheaper the milk, lower the gross point disadvantage

Analysts pointed out that dropping global milk prices, overcapacity in the domestic dairy industry, and breached contracts have directly caused difficulty in selling milk.

Surging milk output in the United States and Australia has triggered price declines since last spring. Purchasing data showed the price of fresh milk has dived 40 percent in major milk-producing regions worldwide such as New Zealand and the European Union (EU) since March 2014.

The MOA said private dairy farmers have become less competitive in the face of cheaper milk prices.

The cost, insurance and freight of imported milk powder had dropped to $2,400 per tonne from $5,000 per tonne in early 2014.

And domestic dairy companies spend up to 10,000 yuan ($1,630) per tonne less to import foreign milk than to purchase fresh milk from local dairy farmers.

"Dairy companies' withering domestic milk needs and the high cost of raising cows have made dumping milk and killing cows reasonable," said Mao Changqing, chief strategist of Citic Securities.

Li Guoxiang, agricultural expert with the Chinese Academy of Social Sciences, said domestic dairy overcapacity has made the crisis even more severe.

Fresh milk output climbed 5.2 per cent year on year in 2014 as many dairy farmers made blind investments in the industry, he said.