--- title: "Soochow Securities Co., Ltd.: The imbalance between supply and demand in the dairy industry is intensifying; focus on leading farms and the profitability recovery of dairy companies" type: "News" locale: "en" url: "https://longbridge.com/en/news/230241085.md" description: "Dongxing Securities Co., Ltd. released a research report indicating that the dairy industry is expected to achieve supply-demand balance in the first half of 2025, stabilizing milk prices. In January 2025, the average price of fresh milk fell by 14.6% year-on-year to 3.12 yuan/kg, resulting in a loss rate of 90.9% for upstream farms. It is recommended to pay attention to leading farms with strong risk resistance and dairy companies with improving profitability, such as YOURAN DAIRY, CH MODERN D, MENGNIU DAIRY, YILI, and TIANRUN DAIRY. It is expected that as upstream production capacity is cleared and demand rebounds, the industry will gradually restore profitability" datetime: "2025-03-03T01:28:08.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/230241085.md) - [en](https://longbridge.com/en/news/230241085.md) - [zh-HK](https://longbridge.com/zh-HK/news/230241085.md) generator: "portal-rs" --- # Soochow Securities Co., Ltd.: The imbalance between supply and demand in the dairy industry is intensifying; focus on leading farms and the profitability recovery of dairy companies According to the Zhitong Finance APP, Soochow Securities released a research report stating that in January 2025, the average price of fresh milk in China's main production areas will drop by 14.6% year-on-year to 3.12 yuan/kg, returning to the level of 2010. The loss rate for upstream farms reaches 90.9%, while downstream dairy companies are affected by low-price competition and powder spray impairment, which drag down profitability. With upstream capacity clearing accelerating and marginal demand recovering, it is expected that the industry will achieve supply-demand balance in the second half of 2025, stabilizing milk prices. It is recommended to pay attention to leading farms with strong risk resistance, such as YOURAN DAIRY (09858) and CH MODERN D (01117), as well as the improving profitability of MENGNIU DAIRY (02319), YILI (600887.SH), and TIANRUN DAIRY (600419.SH). ## The main points of Soochow Securities are as follows: **Oversupply leads to low milk prices, putting pressure on both upstream and downstream operations in the dairy industry.** Affected by weak consumption and other factors, the average price of fresh milk in China's main production areas in January 2025 is 3.12 yuan/kg, a year-on-year decrease of 14.6%, with milk prices returning to the level of 2010 and remaining persistently low. In terms of profits, the total cost of fresh milk/feed cost in January 2025 is 3.28/2.25 yuan per kilogram, down 9.9%/15.4% year-on-year. However, due to the pressure on the average price of fresh milk, the losses have increased year-on-year, with the loss rate for upstream farms reaching 90.9%; downstream dairy companies are facing declining sales ASP, and powder spray impairment also affects profitability. **Accelerated upstream clearing, marginal improvement in supply, just waiting for demand to pick up.** The proportion of breeding cows and the increase in milk yield per cow in 2024 exacerbate the supply-demand imbalance in the industry. The report believes that the oversupply of fresh milk in the industry in 2024 will be more severe than in 2023, with a significant decline in apparent milk prices. In terms of supply and demand comparison, the growth rate of fresh milk production (representing upstream supply) in the second half of 2024 will narrow to single digits year-on-year, while the production of dairy products (representing downstream demand) will improve relative to the first half of 2024, leading to marginal improvement in the supply-demand situation in the industrial chain. With upstream operations under pressure, farms are accelerating elimination. As of the end of January 2025, the number of dairy cows in China is 6.159 million, a decrease of 0.5%/4.8% month-on-month/year-on-year, with the decline rate expanding compared to December 2024. Looking ahead to 2025, the trend of industry reduction is expected to continue. The report predicts that the growth rate of upstream capacity will reach -7% in 2025, which is expected to alleviate the oversupply, while demand in the second half of the year is also expected to enter a recovery channel. Therefore, it is expected that the industry will achieve supply-demand balance in the second half of 2025, stabilizing milk prices. **Survival of the fittest, large farms are expected to benefit from the reversal of the milk price cycle.** In the first half of 2024, the average selling price of raw milk for YOURAN DAIRY and CH MODERN D is 4.16/3.66 yuan per kilogram, higher than the average price of fresh milk in the main production areas of 3.49 yuan/kg. The average unit cost of raw milk for CH MODERN D and the feed cost for YOURAN DAIRY are 2.58/2.17 yuan per kilogram, which is lower than the industry average, indicating better profitability than the industry. The report believes that the upstream dairy farming business is highly cyclical, and survival is key during the cyclical low. The strong risk resistance of large farms is more favorable for navigating the cycle. In the future, as the industry supply-demand improves, leading farms such as YOURAN DAIRY and CH MODERN D are expected to benefit from the cycle reversal, and it is recommended to pay attention to YOURAN DAIRY and CH MODERN D **The supply of raw milk exceeds demand, leading to intensified competition among downstream dairy companies, more frequent promotions, and optimism for future profit improvement.** From January to August 2024, the offline market share of Mengniu and YILI's ambient milk decreased by 1.2 and 1.1 percentage points year-on-year, respectively. The industry's oversupply has allowed some small brands to enter the market with low-priced milk sources, impacting the market share of leading ambient milk brands and intensifying industry competition. In Q2 2024, the profitability of major dairy companies is under pressure. The accelerated elimination of upstream industry players is alleviating the supply-demand imbalance marginally, and the easing of industry competition is boosting gross sales margins and improving impairment losses. In Q3 2024, the profitability of the sector is expected to improve marginally. As the industry supply and demand gradually balance, the firm anticipates that industry competition may further ease, and the profitability of downstream dairy companies is likely to continue to recover. The firm recommends Mengniu Dairy, which has high performance elasticity, YILI, which has low valuation and high dividends, and TIANRUN DAIRY, which has high performance elasticity and a high self-sufficiency rate in milk sources. **Risk Warning:** Fluctuations in raw material costs, intensified industry competition risks, and food safety issues ### Related Stocks - [600887.CN](https://longbridge.com/en/quote/600887.CN.md) - [600419.CN](https://longbridge.com/en/quote/600419.CN.md) - [01117.HK](https://longbridge.com/en/quote/01117.HK.md) - [09858.HK](https://longbridge.com/en/quote/09858.HK.md) - [CIADY.US](https://longbridge.com/en/quote/CIADY.US.md) - [02319.HK](https://longbridge.com/en/quote/02319.HK.md) - [601555.CN](https://longbridge.com/en/quote/601555.CN.md) ## Related News & Research - [MENGNIU DAIRY Raises Full-Year Revenue Growth Target to HSD](https://longbridge.com/en/news/297121830.md) - [MENGNIU DAIRY 1H26 Net Profit Up 15.9% YoY to RMB2.371 billion; No Dividend Declared](https://longbridge.com/en/news/297061647.md) - [China Modern Dairy Holdings Ltd. 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