Despite widespread expectations for a turning point earlier this year, recent data paints a cautious picture. The average price of fresh milk across 10 major production regions in China registered a further decline in the first week of July, falling 6.5% year-on-year to CNY3.04 per liter. This continued downward trend, despite reaching the “trough” phase, indicates that a rapid rebound is unlikely and that substantial challenges persist for Chinese dairy farmers.

The three-year slump has put immense pressure on dairy operations across China, affecting profitability and investment. The market dynamics, influenced by factors such as oversupply and shifting consumer demand, have pushed prices to unsustainably low levels, compelling many producers to curtail expansion or even exit the market. This prolonged period of low prices underscores the volatility inherent in global dairy markets.

The projected one-year recovery period suggests that dairy manufacturers and processors in China will continue to operate in a challenging environment. Raw material costs, while low, reflect a struggling producer base, and consumer confidence or demand may also require time to fully recover. This cautious outlook is essential for strategic planning within the Chinese dairy supply chain and for international partners looking to engage with this massive market.