W6 Dairy Update: China's Production Growth and Ireland's Calf Registration Decline

Published 2024년 2월 16일

In W6 in the dairy landscape, China's raw milk production continued its upward trajectory in 2023, marking the fourth consecutive year of growth, surpassing 6% annually. Despite this positive trend, the industry faced significant challenges, including high production costs, declining profitability, and falling raw milk prices. Although production reached 41.97 mmt, a 6.7% YoY increase, rising feed costs and decreasing milk prices led to a decrease in profitability, with over 59% of surveyed farms reporting losses by Mar-23. Moreover, dairy cow culling is expected to exceed 70% by the end of the year. Meanwhile, Ireland's early calf registrations suggest a potential decline for 2024, with dairy calf registrations dropping significantly compared to 2023, raising concerns about the future sustainability of the Irish livestock sector.

Continued Growth in China’s Dairy Industry Amidst Challenges

China's raw milk production maintained its upward trend in 2023, marking the fourth consecutive year of growth exceeding 6%. However, this growth was accompanied by significant challenges, including high production costs, declining profitability, and falling raw milk prices.

Raw milk production reached 41.97 million metric tons (mmt), a 6.7% year-on-year (YoY) increase, despite stagnant dairy cattle population growth of 6.1%. The average annual dairy cow yield increased by 5.7% YoY to 9.2 metric tons (mt), highlighting improved efficiency. However, high feed costs maintained high production costs, with pasture production costs remaining at historical highs. Profitability declined as raw milk prices fell throughout the year, leading to a price-to-cost ratio below one for the first time in the last ten years. Over 59% of surveyed farms reported losses in Mar-23, and dairy cow culling at the end of 2023 is expected to exceed 70%.

Domestic raw milk prices dropped significantly in 2023, with an average decline of 7.9% YoY. China's total dairy imports fell for the second consecutive year, decreasing by 10% YoY in 2023. Liquid milk imports declined for the first time since 2018, accounting for a smaller share of net imports. Global milk production grew modestly in 2023 (0.8% YoY), and China's average dairy cow yield remains below the global average of 2.72 mt. Global dairy product prices initially fell in 2023 but rebounded in the latter half, ending the year with a slight decrease compared to 2022. China's raw milk production continued to grow in 2023, but profitability challenges threaten future sustainability. High feed costs and falling prices narrow margins, potentially leading to further dairy cow culling.

Early Calf Registrations in Ireland Indicate Potential Decline for 2024

Preliminary data from the Irish Cattle Breeding Federation (ICBF) suggests a potential decline in calf registrations for 2024, raising concerns about the future of the Irish livestock sector. As of W5, 87.85 thousand calves have been registered, representing a significant decrease compared to the same period in 2023 (104.77 thousand). Dairy calf registrations saw a substantial drop of 40.61 thousand compared to 2023, while beef registrations declined by 9.23 thousand.

The calving season is still in its early stages, and registrations are expected to increase in the coming weeks. However, the current trend suggests a possible continuation of the decline observed in 2023, which saw a total reduction of 60.33 thousand calf registrations. Factors like nitrate regulations impacting dairy cow numbers and declining suckler cow populations are cited as potential contributors. While the outlook will emerge later in the season, the trend raises concerns about industry sustainability.