Dairy farming had been sustaining a strong growing momentum in the past decade thanks to the policy on industrial structure reform in various places, mobilization by dairy consumption, mobilization by leading dairy companies and the high farming efficiency. However, starting from the first half of 2005, the rapid growing momentum of dairy farming in China slowed down, the growth of both the cattle inventory and milk output fell from the previous year. In 2007, the efficiency of dairy farming fell to the bottom level. Data reflects dairy cattle price kept on falling pursuant to the constant lower price of raw milk than raw milk cost (in fact, owing to the lacking of a rational mechanism of raw milk procurement price, the risk and pressure from rising production cost of raw milk have always been shifted to dairy farmers), around 40% of dairy farmers ran in losses. The phenomena of ?cattle slaughter? and ?milk abandoning? proliferated.

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BOABC INSIGHTS 2

SECTION I. PRODUCTION of RAW MILK and DAIRY PRODUCTS 2

1.1 Raw Milk Production 2

Focus of this issue 2

Dairy Cattle Inventory 3

Milk Production 4

Raw Milk Price 6

1.2 Dairy Products Production 8

Milk Powder 8

SECTION II. Update of DAIRY MAKET 10

2.1 Retail Price of Fresh Milk 10

2.2 Price of Whey Powder 12

2.3 Milk Powder Market 13

2.4 Lactose Market 14

2.5 Butter Market 14

SECTION III. DAIRY POLICIES 14

Subsidy Fund for Elite Breeds of Dairy Cattle to Cover Whole Nation in 2008 14

ABOUT BOABC 16