(Bloomberg) -- The decades-long boom in China’s dairy industry is drawing to a close, according to S&P Global Ratings.
Revenue at the country’s top three producers fell as much as 13% in the first half of 2024, which could force them “to make riskier bets” and add volatility to their earnings, credit analyst Flora Chang said in a report on Monday. A shrinking population and slowing economy are likely to cap compound annual growth in sales volumes at 2%-3% over the next 20 years, which is half the rate of the previous two decades, Chang said.
The chief executive officer of one of the firms, China Mengniu Dairy Co., warned in the summer that the sector is facing its most severe challenge since 2008, the year when contaminated milk sickened hundreds of thousands and devastated the industry’s reputation.
Like many Chinese industries, dairy is plagued by overcapacity. Domestic milk production has surged 40% in the past 10 years, and the government is looking at limiting imports from the European Union, which would help relieve the pressure on farmers.
However, conditions may improve 10 to 15 years from now, said S&P’s Chang, as China’s growing number of elderly will likely offset the decline in consumption from babies.
On the Wire
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The Week’s Diary
(All times Beijing unless noted.)
Monday, Nov. 25:
- China to release monthly medium-term lending rate
Tuesday, Nov. 26:
- Nothing major scheduled
Wednesday, Nov. 27:
- China’s industrial profits for October, 09:30
- CCTD’s weekly online briefing on Chinese coal, 15:00
Thursday, Nov. 28:
- Nothing major scheduled
Friday, Nov. 29:
- China’s weekly iron ore port stockpiles
- Shanghai exchange weekly commodities inventory, ~15:00
Saturday, Nov. 30:
- China’s official PMIs for November, 09:30
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