Shortages send milk prices in China to 2nd highest in world

Shortages send milk prices in China to 2nd highest in world

Yeh Wen-yi and Staff Reporter

2013-09-29

The price of raw milk in China has increased since July due to shortages in supply, as the price of the commodity in the country has become the second most expensive in the world behind only Sweden, according to media reports. China Mengniu Dairy Company reported that the price of raw milk has increased 12% on average and domestic dairy companies including Mengniu, Bright Dairy and Sanyuan have given notice to supermarkets about potential price increases.Guangzhou’s 21st Century Business Herald reported that China stopped milk imports from New Zealand after some milk powder was found to have contained botulism bacteria. Dairy companies that previously purchased New Zealand milk have turned to domestic suppliers, which has created a bottleneck.

Chen Yu, director of the Dairy Association of China, said the current supply of domestic milk being unable to meet demand is due in part to cows maturing slowly.

Additionally, some cattle breeders slaughtered their animals after mad cow disease was reported in some areas of China last year.

A report by the China International Capital Corp (CICC) suggests that demand for milk in China was recorded at 502 million tonnes in 2013, while domestic output stood at 411.8 millions tonnes.

The price of domestically produced liquid milk has increased by 5%-17% since late August.

CICC said prices of dairy products are likely to go up 10% in the second half of this year in response to rising costs.

To avoid shortages, some experts suggest enhancing the scale of raising cows while expanding and stabilizing production so the Chinese dairy industry will not be hit by repeated supply shortages.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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