The high market price for milk has generated considerable profits for dairy enterprises in mainland China, Shanghai’s China Business News reports.
Mengniu Deluxe-brand organic milk is sold for over 6 yuan (US$0.98) per 250ml box in China. The average procurement cost for the fresh milk used in the product has been pegged at 4-5 yuan (US$0.65-$0.81) per kilogram, meaning the production cost of a box of Mengniu Deluxe organic milk is no higher than 2 yuan (US$0.33).
Seven of the largest dairy companies, including wholesalers Modern Farming Group, Yuan Sheng Tai Dairy Farm and China Shengmu Organic Milk, reported a total of 4.8 billion (US$778 million) in profits during the first half of the year, the business daily said.
Hurt by an insufficient supply of fresh milk at the point of origin for the product during the second half of last year, however, the average domestic price for fresh milk surged to 4.7 yuan (US$0.76) per kg in December 2013.
China Dairy Association honorary chairperson Song Kungang has predicted that the lack of milk sources and high milk prices will act as barriers against the development of China’s dairy industry. «Milk prices in our country are already at one of the highest levels in the world,» he stated.
High milk prices spell good news for fresh milk providers, however. In its financial report, Modern Farming reported revenue of 2.6 billion yuan (US$423 million) in the first six months of the year, registering year-on-year growth of 86.2%. The firm’s net profits reached 523 million yuan (US$85 million), up 240.6% year on year.
The fresh milk produced by Modern Farming was sold for an average of 5.15 yuan (US$0.84) per kg during the first half of the year, up 19.8%.
The profit margin for the dairy cattle breeding industry rose by 12.7 percentage points to 38.1% during the six-month period, the paper said.
Yuan Sheng Tai Dairy’s net profit jumped by 150% during the first half of the year from the same period last year, while that of China Shengmu shot up 171.5%. The overall profit margin for the fresh milk supply sector reached 47%, according to the daily.
China Shengmu also expects demand for high-quality fresh milk to rise further, owing to surges in per-capita income and consumption levels.
Source: Want China Times
