Core Insights - The dairy farming industry in China is facing significant challenges, with cumulative income losses projected to reach 70 billion yuan from 2023 to 2025, and losses from fresh milk powder estimated at 20 billion yuan [1][4] - Current government support and project subsidies are insufficient to fundamentally resolve the issues, and capacity reduction is deemed the most effective way to achieve supply-demand balance and stabilize milk prices [1][4] Industry Overview - The national dairy product output is expected to reach 29.618 million tons in 2024, indicating relative stability in overall production, but the market is experiencing a phase of supply-demand imbalance due to a weak consumption environment [1] - The bottom of the current cycle has been identified, with a reversal expected in about one year [3] Capacity Reduction Strategies - Continuous implementation of industry relief policies is necessary for 1-2 years, focusing on leading dairy enterprises to drive capacity reduction in milk source bases by 2025-2026 [4][5] - Recommendations include increasing the proportion of breeding cows to 55%-60% and enhancing the standards for reserve cows, alongside using core breeding technologies to prevent significant future capacity declines [4][5] Consumption Growth Potential - Economic growth is expected to drive an increase in milk consumption, with an estimated annual consumption increment of 1 million tons, despite a decline in population [5] - The average annual increase in dairy cow stock is planned to be controlled at 100,000 heads, with a target of breaking through an average milk yield of 11 tons per cow [5] Strategic Recommendations - Establishing a strategic regulatory mechanism for the dairy industry is suggested, drawing on successful management practices from developed dairy nations [7] - A legal and effective pricing mechanism for fresh milk should be developed to reflect supply-demand dynamics and production costs [7] Transition Pathways - The industry is encouraged to transition towards a green and low-carbon model, enhancing cow longevity and management practices, and increasing research and technology promotion [8] - The integration of dairy farming with land use policies is recommended, aiming for a land allocation of 2 acres per cow [7][8]