(Yicai) Feb. 20 -- China Modern Dairy Holdings and other major Chinese milk producers expect to have lost money last year, with many staring at wider losses than the year before, as the nation's raw milk industry struggles with a dairy cow glut that began over two years ago.

Modern Dairy is projecting net losses of between CNY1.3 billion (USD185 million) and CNY1.5 billion (USD212 million) for the year 2024, according to the Ma’anshan, eastern Anhui province-based company’s annual earnings forecast released on Feb. 18. This is a huge drop from the net profit of CNY190 million (USD26 million) that it made in 2023.

And business got substantially worse as the year progressed. Modern Dairy’s net loss of CNY230 million (USD31 million) in the first half last year expanded to more than CNY1 billion (USD138 million) in the second half.

The losses are the result of a sustained drop in the price of dairy cows and fresh milk which led to a slump in the fair value of dairy cows, resulting in impairment losses in the asset and goodwill valuations of the Hong Kong-listed firm, Modern Dairy said. The company’s decision to cull some low-yield dairy cows last year also contributed to the losses.

The two other fresh milk suppliers listed in Hong Kong, China Shengmu Organic Milk and AustAsia Group, also reported widening net losses last year, for similar reasons to those of Modern Dairy.

The average price of fresh milk slumped 17 percent in 2024 from the year before, while the average price of beef cattle tumbled 16 percent, AustAsia said.

The industry was slow to curb the oversupply of dairy cows last year, independent dairy analyst Song Liang said. This is partly because more new farms were being put into production. Milk production only began to slow noticeably in the third quarter last year.

Milk production for the entire year of 2024 is still expected to reach 40.79 million tons, a dip of just 2.8 percent from the previous year, according to industry data.

However, during the eight-day Chinese New Year break that ended Feb. 4, sales of dairy gift boxes picked up in some parts of the country, providing a glimmer of hope that demand will rebound this year. Several regional dairy distributors told Yicai that the sales of milk gift boxes in their areas over the holiday were much better than the same period last year.

The recovery of consumer demand appears to be having an impact on raw milk suppliers as well. The head of a large farm in northern Hebei province told Yicai that the company’s recent fresh milk sales are “much stronger” than the same period in 2023.

As excess capacity is cleared and consumption recovers, raw milk prices are expected to start to rise in the second half, Song said. However, given the relatively slow recovery in demand, it is unlikely that there will be the sharp surge in price that typically occurs at the end of a downturn.

Editor: Tang Shihua, Kim Taylor