Zhi Tong Cai Jing·2025-05-22 08:53Core Viewpoint - The dairy industry is undergoing a capacity adjustment and destocking process, with a clear direction influenced by policy support, leading to potential stabilization of milk prices in the second half of the year [1] Group 1: Milk Price Cycle - The milk price cycle is influenced by multiple factors including capacity, demand, and imports, creating a cyclical relationship where milk prices affect farming profits, which in turn influence capacity [1] - Since 2008, the milk price has experienced three downward cycles and two upward cycles, with significant events like the melamine incident in 2008 impacting prices [1] Group 2: Industry Losses and Capacity Adjustment - The fresh milk price decline in 2024 has led to severe losses for farms, with a continuous destocking trend observed [2] - In 2024, the total raw milk production is projected to be 40.79 million tons, a decrease of 2.8% year-on-year, with a 4.5% decline in the number of Holstein cows [2] Group 3: 2025 Outlook - The current milk price adjustment cycle has lasted over three years, with over 80% of the industry facing losses, indicating a more severe situation than previous cycles [3] - Despite ongoing losses, policies such as fertility subsidies and student milk promotions are expected to marginally boost dairy product demand, leading to a potential stabilization of raw milk prices in the second half of 2025 [3] Group 4: Milk Price and Dairy Company Stock Performance - Historical data shows a high correlation between milk price fluctuations and stock price movements of upstream dairy companies, with stock prices often reacting ahead of milk prices [4] - During periods of rising milk prices, upstream companies are expected to benefit directly, while downstream dairy companies may experience stock price changes driven by their product structure upgrades and market expectations [4]