Imports of powdered milk powder surged, impacting domestic fresh milk purchases, milk shortage

Mengniu cuts the price behind purchasing milk: Dairy supply and demand chain with mutually beneficial interests

A “bargaining price” between dairy enterprises and dairy farmers on fresh milk ingredients exposes the drawbacks of the Chinese dairy industry model. Although the event of Mengniu Dairy's price reduction and milk collection in Shandong's Jiaodong region was temporarily terminated with Mengniu's concessions, the industry issues involved were still lacking in countermeasures.

Dairy practitioners told the “China Business” reporter that price issues are affected by market rules, but China’s industrial model is not sound. Upstream and downstream cannot achieve profit synergy, but a zero-sum game, so companies with strong discourse power are While safeguarding their own interests, the interests of dairy farmers will be impaired. This distorted relationship between supply and demand is the source of many problems. Milk shortages or surpluses are the result.

Reduced price acquisition is a non-case

“There is a strong volatility in raw milk prices. Since 2014, both domestic and international milk prices have fallen significantly, and our milk collection prices will also be adjusted accordingly.” Mengniu Dairy insiders interviewed on September 24 At the time, said: "The controversy over the milk collection price between our company and Lacey's individual milk has been properly resolved and both parties have continued to cooperate."

The time will be pushed until the end of July. The person in charge of Mengniu Dairy Tai'an Co., Ltd. (hereinafter referred to as "Tai'an Mengniu") announced to Jimo City in Qingdao that the price of milk from Qingdao, Yantai and Weihai will be purchased from August 1. From July's 4.5 yuan/kg to 3.5 yuan/kg.

In response to this, Taian Mengniu's price reductions are based on the fact that, due to the sharp drop in the price of foreign imported raw material powder, companies have reduced the demand for domestic milk sources. Second, the weak domestic consumer market has led to a lack of consumer demand for finished products. The supply exceeds demand and the enterprise is operating at full capacity.

Although full of reasons, it ignores the supplier side. According to the dairy farmers, the cost of local fresh milk was around 3.7 yuan/kg, and the purchase price of 3.5 yuan/kg given by Mengniu could not be recovered, so they joined together to protest against Mengniu.

It is understood that the local dairy farmers signed the "Fresh Milk Purchase and Sales Contract" with Mengniu Dairy on February 1, 2012, which is valid until January 31, 2015. On May 29th, 2014, the two sides re-signed a five-year “Fresh Milk Purchase and Sales Contract”. The most significant difference between the two contracts is that the new contract canceled the minimum protection price of 2.8 yuan/kg, and added the “according to the supply relationship” condition based on the “according to the market” pricing.

According to the above agreement, Mengniu made a price reduction decision based on the “market supply and demand relationship” and did not violate the contract. However, dairy farmers believe that at the time Nestlé bred in the local community, the scale of farm fresh milk purchase price is 3.9 ~ 4.05 yuan / kg, Yili is 4.2 ~ 4.3 yuan / kg, bright is 4.1 ~ 4.2 yuan / kg, Mengniu is 3.5 Yuan/kg clearly violates the "accompanying market" agreement in the contract.

After several games, Mengniu made concessions. Since September 16, the purchase price has been raised by RMB 0.4/kg on the basis of RMB 3.5/kg, and both parties have continued to purchase and sell. The incident seems to have subsided, but, according to report, Mengniu has recently delivered the milk in August, the unit price is 3.4 ~ 3.5 yuan / kg, and dairy farmers still want to recover Mengniu's milk loss in August.

According to Mengniu’s dairy farmers in Shandong, Mengniu’s milk collection price in the middle and western regions of Shandong Province also dropped by about RMB 0.4/kg. Another dairy farmer who provided milk for another brand told reporters that although they did not reduce the price of milk collection, they raised the standard on milk collection and refused to collect milk on the basis of non-compliance. The milk produced will be cheap. Sold to big bale powder company.

According to dairy farmers in Jinan, Tai'an, and Dongying, some milk companies have already rejected the 1 ton-dairy milk station.

The game of interests loses

According to Lei Yongjun, chairman of the company's planning agency in Putian Road, Beijing, whether it is a dairy company or a dairy farmer, there is nothing wrong with arguments regarding prices. However, the outcome of the game can not lead to a win-win situation for both parties. The fundamental reason lies in the domestic unsound industrial model.

Wang Heng, chief operating officer of the North Central China FMCG brand marketing and planning agency, told reporters that the price and demand of domestic fresh milk have been subject to the price of international bale powder. In 2013, after the incident of the Evergrande Oolong oolong incident, the international bale powder import volume once fell sharply. Domestic enterprises can only use domestic bales of powder and raw milk to fill the material deficit and trigger a “milk shortage”. .

After the supply of large bales resumed supply in 2014, prices continued to fall, from 40,000 yuan/ton at the beginning of the year to 24,000 yuan/ton in August, which prompted companies to purchase imported bale powder in large quantities, and discard domestic bale powder. Reduce the purchase of raw milk. Wang Ziheng pointed out: "Companies are all aiming at profitability. Imported bale powder has advantages in both quality and price. It is the company's first choice, and in order to reduce costs, raw materials that can replace raw milk with large bales of powder can be used. The former will be replaced by the former, so the demand for raw milk this year is declining."

Many companies consider such price fluctuations insufficiently. When prices of imported powdered milk go up all the way and fall back to 40,000 yuan/ton at the beginning of the year, many dairy companies expect that prices will rebound soon. Therefore, a large number of imported powders are purchased, and prices nevertheless drop all the way. Caused a lot of milk inventory backlog. According to dairy industry sources, there has been a huge loss for milk powder importers.

“Mengniu, Yili and other large enterprises must be first-in-a-kind to purchase raw milk of large-scale and more secure pastures in the process of collecting milk, and will consider smaller-scale retail investors when they cannot meet demand. "Wang Ziheng said that this leads to a situation in which companies will inevitably push prices down to retail investors when demand is met.

Therefore, the industry insiders pointed out that the Mengniu incident should be a common phenomenon, and large dairy enterprises are facing the same problem. "This should be a microcosm of the current pattern of the domestic dairy industry. The price dispute between Mengniu and dairy farmers has only opened the tip of the iceberg."

In the view of Jian Yihua, a food industry researcher at China Investment Consulting, this once again revealed the long-standing problem of the domestic dairy industry, that is, the mid-to-downstream dairy products enterprises in the entire industrial chain occupy an advantageous position, and the interests of upstream farmers cannot be guaranteed, and this is also domestic. The root cause of many problems, such as severe fluctuations in the price of raw milk and inadequate supply.

“The split model of pastures and plants will inevitably have these problems. This is inevitable.” Wang Ziheng told reporters that grazing lands generally have problems of high investment, long return period, and high risk, so they are often attached to downstream production enterprises. . “Most of the foreign farms and factories participate in each other's shares. This forms a community of interests. Even if a party loses money, it can also backfeed the other side. This is a relatively successful model, and it is still the opposite between China and the Mainland, and it is difficult to achieve mutual profit.”

Where is the way out?

The event ended with Mengniu's price increase of 0.4 yuan/kg. It seems that dairy farmers have achieved a “phased” victory in price competition. However, from the perspective of long-term industrial development, its prospects are worrisome.

Since 2013, various "new policies for the dairy industry" have been introduced, and "self-built, self-controlled milk sources" have been mentioned repeatedly and become one of the conditions for obtaining national policy support. In this context, all milk companies have merged or built ranches in order to control milk sources.

Taking Mengniu as an example, its main raw milk supplier, Modern Animal Husbandry, invested in the construction of 10,000 cow farms in Shanghe County, Shandong Province in the second half of last year, and 80% to 90% of the company’s raw milk had an agreement to supply Mengniu, and the new ranch will be put into production. Afterwards, the demand for fresh milk from Mengniu will be met to a greater extent, so the demand for Mengniu's fresh milk will also be further reduced. "At that time, perhaps it is no longer just a matter of reducing the price and collecting milk, but it will stop the cooperation with retail investors." Wang Ziheng pointed out.

Including Ma Yun's 2 billion investment in Yili Ranch and Evergrande's establishment of Evergrande Animal Husbandry, etc., also confirmed the demand of large-scale aquaculture and large-scale ranchers for milk giants. “The entry of these capitals will help the development of domestic milk sources in the direction of intensive and industrialization, and will help regulate the dairy industry chain.” Wang Ziheng believes that “milk enterprises must have self-built, self-controlled milk sources and form upstream and downstream interests. Community, there will be no mutual phenomenon between pastures and factories."

However, for individual investors, it may be completely "eliminated out", "either big or dead." Wang Ziheng believes that there are only two ways out of the rural households. One is to reorganize the districts and form a medium-sized cooperative to achieve standardization. , Standardization of management and management, to strengthen the right to speak with corporate cooperation, or to withdraw from the market competition.