(Yicai) Nov. 27 -- China’s dairy farmers continue to be under great pressure as the price of raw, or unpasturized, milk slumps again after a brief uptick last month and market insiders warn that the worst is not over yet.

Milk prices started to slide at the end of last year and although there was a fleeting rebound in September and early October when the market price of raw,milk climbed to as much as CNY6 (USD0.84) a kilogram and the ex-farm price reached CNY4 a kg, prices have now fallen back to close to what they were in the first half.

The average price of raw milk in 10 major milk-producing regions, such as the Inner Mongolia Autonomous Region and northern Hebei province, dipped 0.3 percent in the second week of November from a week ago, and 10.2 percent from the same period last year, to CNY3.71 (USD0.51) per kg, according to data from the Ministry of Agriculture and Rural Affairs.

Raw milk prices were around CNY3.60 (USD0.50) per kg in the first six months and 60 percent of milk producers suffered losses, a dairy farm owner in Hebei province told Yicai. There used to be over 50 dairy farms in this area, but now there are just over 10 and most of these are medium to large-sized farms with a daily yield of over 30 tons, he added.

And the industry is not out of the woods yet as it is still being affected by external factors, according to Tang Hong, general manager at Beijing Sanyuan Foods. In the third quarter, milk sales tumbled 5.1 percent from the same period last year, which is a much greater fall than the 2.5 percent dip in the first half.

The end of the year is peak season for the dairy sector. If raw milk prices do not pick up now, the situation will only get worse, the dairy farm owner said.

Dairy companies are buying milk according to the guidance price of the Dairy Association of China and there are no restrictions on the amount they can buy, the person said. Thankfully the price of animal fodder, such as soybean meal, has been substantially reduced recently, so the remaining milk producers can continue to operate even if their profit margin is slim to none.

More Cheese

Developing more cheeses will help stem the tumbling milk prices because cheese uses a huge amount of raw milk and can be stored for a long time, Li Shengli, chief scientist at the National Dairy Industry and Technology System, said at a recent industrial forum.

But the biggest challenge facing China’s home-grown cheese industry is the cost, said Dou Ming, an industry analyst from international breeding magazine Holstein. Due to different industrial models, the production cost and the price of raw milk in China is far higher than that in New Zealand.

The government needs to issue policies that will support the growth of home-grown cheeses to ease cyclical difficulties in the supply of raw milk, Chai Xiu, founder and chief executive officer of cheese maker Milkground, said at the forum.

Editors：Tang Shihua, Kim Taylor