16 February 2019

Milk price hike may run out of steam soon

According to market monitoring by the official Xinhua news agency, the price of liquid milk in plastic bag, one of the most affordable among dairy products in mainland China, has risen steadily this year even if the costs of other staples have remained stable. The selling price of the milk product has increased 9.1 percent on average since the start of the year. In some regions like Beijing and Xinjiang, the price hike was more than 20 percent.

The rise in the prices of domestic dairy products has picked up speed since August due to an acute shortage of raw milk supply, which in turn has resulted from a combination of hot weather and the ban on imports from New Zealand. The situation has not improved even after the weeklong National Day holiday.

Shelves for liquid milk in Beijing’s supermarkets have been out of stock on and off recently, especially those for low-end and mid-range products, the National Business Daily reported Wednesday. The National Development and Reform Commission, the country’s top economic planner, has discussed the problem with several major dairy enterprises, but has yet to come up with a viable solution, the newspaper said.

China Modern Dairy Holdings Ltd. (01117.HK), the state’s largest dairy farm operator, has been buoyed by the shortage of raw milk supply. The stock has surged over 60 percent in the last three months. Meanwhile, newly listed China Huishan Dairy Holdings Co. Ltd. (06863.HK) also gained support amid recent weakness in the broader market.

But investors should bear in mind that the problem of insufficient raw milk supply will ease eventually once Beijing reopens the door to New Zealand imports, which appears to be just a matter of time. Also, milk yield from cattle herds across the country is expected to rebound amid the cooler weather in autumn.

– Contact the writer at [email protected]




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