Caixin News Agency, September 27 (Editor Hu Jiarong) Benefiting from the positive news in the market yesterday, the dairy stocks on the Hong Kong stock market collectively strengthened. As of press time, CH Modern Dairy (01117.HK), Ausnutria (09858.HK), Ausnutria (01717.HK), and Mengniu Dairy (02319.HK) rose by 20%, 19.23%, 13.5%, and 12.58% respectively.

In terms of news, according to the website of the Ministry of Agriculture and Rural Affairs, recently, the Ministry of Agriculture and Rural Affairs, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Finance, People's Bank of China, State Administration for Market Regulation, and China Banking and Insurance Regulatory Commission jointly issued the "Notice on Promoting the Stable Development of Beef Cattle and Dairy Cattle Production" (hereinafter referred to as the "Notice"), deploying measures to stabilize beef cattle and dairy cattle production, helping breeding households overcome difficulties. The "Notice" specifies 7 policy measures.

First, focus on stabilizing the basic production capacity of beef cattle and dairy cattle, requiring localities to accelerate the implementation of projects to expand and improve the basic cow herd, cultivate new types of operating entities such as family dairy farms and dairy farmer cooperatives.

Second, effectively reduce the feed costs of breeding households, make good use of grain-for-feed support policies, accelerate the progress of storing and storing high-quality forage; implement the whole-county project for the transformation and upgrading of grassland animal husbandry, improve the quality of project construction.

Third, promote the integrated development of dairy farming and processing, fully implement the requirements for stable and controllable milk sources, stabilize the purchase and sale order of fresh milk, regulate the addition and labeling management of reconstituted milk, optimize the implementation of projects to enhance the dairy production capacity of the whole county, promote the integrated development of the primary, secondary, and tertiary industries.

Fourth, strengthen credit insurance policy support, establish a whitelist system for beef and dairy cattle farms, provide support to farms temporarily experiencing difficulties through reasonable extension, renewal of loans, etc., without blindly withdrawing, suspending, or limiting loans. Support for including live beef cattle, dairy cows, breeding pens, and other items into the range of collateral, encouraging banks to innovate special financial products such as "silage loans". Actively make good use of policies such as expanding the base stock of mother cows to improve quality, cultivating new types of dairy business entities, and exploring support through subsidized interest rates. Support the development of beef cattle farming and basic cow breeding insurance according to local conditions.

Fifth, strengthen support for beef and dairy cattle industries in poverty alleviation areas and among impoverished populations, coordinate the use of central financial bridging funds, and provide subsidies to poverty alleviation breeding households that meet the support conditions. Plan and implement projects to assist the beef and dairy industries in poverty alleviation areas, enhancing risk resistance.

Sixth, promote beef and dairy consumption, scientifically promote and showcase the quality and nutritional value of fresh beef and milk, promote the consumption of milk by students, encourage eligible areas to stimulate milk consumption through methods such as distributing consumption vouchers.

Seventh, enhance technical guidance services, strengthen production situation analysis and forecasting guidance, continue to implement the special recruitment plan for agricultural technology promotion, guide the prevention and control of beef and dairy cattle diseases; integrate and promote a batch of efficient and practical technologies to achieve cost savings, quality improvement, and efficiency enhancement.

What is the current milk production data in China?

National dairy system data shows that as of June 2024, after three months of capacity adjustment, the national daily output of raw milk has cumulatively decreased by 4,500 tons, with approximately 0.15 million lactating cows eliminated. The effectiveness of capacity adjustment is beginning to show. Data from the National Bureau of Statistics shows that from January to August 2024, the total domestic dairy product output was 19.168 million tons, a decrease of 2.6% compared to the same period last year. The output in August was 2.56 million tons, an increase of 1.1% year-on-year, marking the first monthly production increase of the year.

At the same time, some institutions analyze that although the supply of raw milk has grown more than the demand, leading to an imbalance between supply and demand, which may temporarily lower dairy retail prices, per capita milk consumption in China still remains below the global and Asian average levels.

Fangzhen Securities' research report predicts that the demand for dairy products will continue to show a trend of moderate recovery. It is expected that in the second half of the year, demand will gradually pick up, and the peak period for raw milk will continue, with the performance of national leading dairy enterprises and regional dairy companies being worth looking forward to.

In the long run, China has great growth potential in per capita dairy product consumption, and the uneven consumption development of different categories and regions indicates the expected growth of demand in the medium to long term. Looking ahead to the second half of the year, it is expected that industry demand will continue to moderately recover, and it will take some time to achieve a balance between the supply and demand of raw milk. With the continuous decline in raw milk prices, there is still room for improvement in the industry's gross margin levels.