Summary of Key Points
Today, the stock prices of dairy companies listed on the market surged collectively (with many hitting their daily price limits), driven by recent intense attention from institutions and the media to the "turning point" in the raw milk industry: raw milk prices have bottomed out and are beginning to rise, the supply and demand balance is expected to improve, and markets anticipate that dairy companies' future operations will improve. Although some dairy companies still face pressure in their performance for the first half of the year, stock prices have already reflected optimism about the future, with leading companies that control milk sources being particularly favored.
Detailed Analysis
1. Why did stock prices suddenly "take off"? — The market is betting that the "turning point" in raw milk prices has indeed arrived
Recently, experts from institutions and dairy industry conferences have been signaling that the raw milk industry is finally on the path to recovery after a prolonged period of decline. For example, the country's chief scientist in dairy cattle production stated that milk prices have started to rise, and the price of milk purchased directly from farms (bulk milk) has also increased. Additionally, the number of dairy cows capable of producing milk continues to decrease (decreasing supply), which means milk prices are expected to rise slightly in the second half of 2026. Several institutions have issued reports expressing optimism about a moderate turnaround in the raw milk industry in 2026. Hearing these positive developments, the market believes that dairy companies will find it easier to generate profits in the future, leading to a collective increase in stock prices today.
2. Why are stock prices rising despite current losses? — Stock prices reflect "future expectations," not "present performance"
Although some dairy companies have reported disappointing financial results for the first half of the year (for instance, Yantang Dairy's net profit decreased by 50%-65%, Zhuangyuan牧场 lost between 21 million and 27 million yuan, and Tianrun Dairy's non-recurring net profit also significantly declined), stock prices reflect future prospects, not current performance. Part of the previous losses for dairy companies were due to falling milk prices, which reduced the value of their cattle on financial statements (known as "losses from changes in the fair value of biological assets"). With rising milk prices, these losses will gradually disappear. Therefore, the market is focused on future improvements, regardless of current profitability.
3. Won't higher milk prices increase costs? — A short-term "pain" for a long-term "benefit"
On the surface, higher milk prices mean increased costs for dairy companies to purchase milk. However, this is actually good for the industry as it was previously in a state of oversupply, with low-priced bulk milk flowing to smaller and medium-sized dairy companies, which used it to produce inexpensive products and engage in price wars, resulting in overall industry losses. With rising prices and a gradual balance or even shortage of supply, leading companies with their own milk sources can secure stable supplies and pass on the cost increases to consumers. Smaller companies, lacking their own farms, face higher purchase costs and are unable to continue engaging in price wars, leading to healthier competition in the industry.
4. Who will benefit the most? — Leading companies with milk sources
Leading dairy companies (those with their own farms) have a clear advantage: they can either produce milk themselves, maintaining stable costs, or negotiate more favorable prices with farms. When milk prices rise, they can pass on the increases to consumers without significantly affecting their profits. Smaller companies, lacking their own milk sources, must buy milk at higher prices from the market, putting them under greater cost pressure and squeezing their profit margins. As a result, leading companies are expected to gain more market share and profits in the future, which is why their stock prices performed more prominently today.
5. Are the signs of a turning point reliable? — Several key indicators are changing
Several key indicators suggesting a turning point in the raw milk industry have emerged: (1) Rising milk prices after a period of decline; (2) Increasing prices for bulk milk, which directly reflects market supply and demand; (3) Declining numbers of dairy cows in production (decreasing supply, indicating future scarcity). These factors combined indicate that the industry is transitioning from oversupply to a balance or even shortage of supply, confirming the arrival of a turning point.
In summary, today's surge in dairy company stocks reflects the market's anticipation of a turnaround in the raw milk industry. Although current performance has not yet fully improved, the future industry landscape and profit potential are promising, especially for leading companies with advantageous milk sources. For individuals interested in this sector, it is advisable to focus on those companies that own their own farms and have stable supply chains.