China's Dairy Industry: 2025 Review and 2026 Outlook

March 25, 2026, 5:43 PM

GAPS-Global

112

Guide

Highlights at a glance

Recent supermarket dairy price increases reflect upstream cost pressures reaching consumers, signaling fresh milk prices have bottomed out and begun rebounding. This marks a clear industry recovery as consumer demand gradually warms, capacity reduction takes effect, import impacts weaken, and policy dividends accelerate. In 2025, China's dairy sector showed stable production growth, structural optimization, lower costs, and differentiated benefits. Farming levels improved, processing adjusted, and import substitution accelerated. For 2026, with stabilized milk prices, warming demand, weaker import shocks, and policy support, China's dairy industry is entering a new phase of recovery, quality improvement, and high-quality development. This article analyzes 2025 operations and forecasts 2026 trends, covering farming, processing, international factors, and policy impacts, concluding with development recommendations for farming, processing, and consumption sectors.

Recent price increases for dairy products in supermarkets across various regions intuitively reflect the transmission of upstream raw milk cost pressures to the consumer end. This also confirms the positive judgment that fresh milk prices have bottomed out and are rebounding, signaling an overall industry recovery. As downstream consumer demand gradually warms up, the results of capacity reduction continue to manifest, import shocks weaken, and policy dividends accelerate release, the upward channel for milk prices has gradually opened, making the industry's recovery trend increasingly clear. This positive change is both the result of continuous efforts in favorable policies in the dairy sector in recent years and a concentrated embodiment of spontaneous market regulation and proactive industry adjustment.

Looking back at 2025, China's dairy cow farming and dairy processing industry generally presented a running trend of stable production growth, structural optimization, declining costs, and differentiated benefits. Farming levels steadily improved, the processing side continued to adjust its structure, and the process of domestic substitution accelerated. Entering 2026, based on the stabilization of fresh milk prices at the bottom, the gradual warming of consumer demand, and the weakening of international import shocks, coupled with the dual drive of policy support and consumption upgrading, China's dairy industry is expected to usher in a new stage of stabilizing, recovering, improving quality and efficiency, and achieving high-quality development.

I. Operational Situation of the Dairy Cow Farming Industry in 2025

(A) Farming Side: Slight Increase in Milk Production, Optimized Herd Structure, Declining Feed Costs, and Significant Benefit Differentiation

The dairy industry generally showed a favorable trend of "stable production, optimized structure, reduced costs, and differentiated benefits." National milk production reached 40.91 million tons, a year-on-year increase of 0.3%. By accelerating the culling of replacement heifers and increasing the proportion of lactating cows, the herd structure continued to improve; the average annual yield per adult cow exceeded 10 tons. Multiple quality indicators in large-scale pastures reached EU standards, placing farming levels among the top tier globally.

Capacity optimization and structural adjustment continued to deepen. Under the joint action of overall industry regulation and market mechanisms, the number of dairy cows fell significantly from historical highs, gradually returning to 2021 levels, effectively alleviating market pressure caused by previously relatively loose supply. The results of industrial structure optimization were significant; the leading role of top enterprises continued to strengthen, with the number of dairy cows held by the top ten farming enterprises growing by more than 70% compared to 2020. The proportion of large-scale farming steadily increased, and industrial concentration continued to rise.

Cost advantages on the farming side gradually became prominent, while fresh milk prices continued their downward trend. According to monitoring by the Ministry of Agriculture and Rural Affairs, the average price of fresh milk in 10 major dairy-producing provinces was 3.12 yuan/kg in January 2025 and 3.03 yuan/kg in December, with a full-year decline of nearly 3%. Meanwhile, support from the cost side continued to strengthen. In December 2025, feed costs dropped to 2.1 yuan/kg, a year-on-year decrease of 7.5%, reaching a ten-year low. This effectively alleviated operational pressure on the farming side and further consolidated and enhanced the cost competitiveness of the entire industry.

Operational conditions gradually improved, and the loss ratio narrowed significantly. According to monitoring by the National Dairy Industry Technology System, by the end of 2025, the full-year pasture loss ratio narrowed to 45.6%, a decrease of 15.3 percentage points compared to the end of 2024, effectively alleviating overall industry operational pressure. Leading enterprises and large-scale pastures, leveraging advanced farming technologies, refined management systems, robust financial guarantees, and whole-industry chain collaborative layouts, have built core competitive advantages in cost control, milk source quality, market bargaining power, and risk hedging. Their ability to cope with market cycle fluctuations, resist downward price pressure, and prevent operational risks is significantly superior to that of small and medium-sized pastures.

(B) Processing Side: Slight Decline in Production, Differentiated Import Structure, and Continuous Promotion of Domestic Substitution

Affected by adjustments in consumer demand and industry capacity optimization, annual dairy product production was 29.503 million tons, a year-on-year decrease of 1.1%. Dairy product imports totaled 2.6574 million tons, a year-on-year increase of 1.6%. While the total volume maintained slight growth, the category structure showed obvious differentiation.

From a sub-category perspective, traditional import categories such as whole milk powder (WMP), liquid milk, condensed milk, and cream all showed a downward trend. Specifically, WMP imports were 636,000 tons (down 0.3%); liquid milk imports were 654,000 tons (down 9.5%); condensed milk imports were 15,600 tons (down 16%); and cream imports were 264,500 tons (down 8.2%). Conversely, imports of cheese, butter, and whey powder maintained rapid growth. The import structure continued to optimize, aligning highly with domestic trends of consumption upgrading, premiumization, and functionalization.

Overall, as domestic deep-processing capacity for dairy products steadily releases and processing technology and product innovation capabilities continuously improve, the substitution effect on imported dairy products continues to strengthen. The industry's supply chain autonomy, controllability, and stable supply capabilities have further improved.

II. Development Forecast for the Dairy Cow Farming Industry in 2026

(A) Price and Cycle: Demand Recovery Drives Milk Price Rebound, Cycle Fluctuations Tend to Flatten

First, driven by consumption during the 2026 Spring Festival holiday, the supply and demand structure of fresh milk has been effectively improved, driving a phased price increase. After the Spring Festival, fresh milk prices remained stable at 3.03 yuan/kg without a significant drop, fully indicating that current fresh milk prices in the dairy farming industry have bottomed out. Second, as temperatures gradually rise, demand for dairy products will warm up. This increase in market demand will support milk prices. It is expected that by the second quarter at the earliest, fresh milk prices will stabilize and rebound. Subsequent price fluctuations will gradually flatten, and the industry's profitability environment will further improve.

(B) International Influence: Weakening Import Shock, Continuous Release of Demand Potential

From an international perspective, global raw milk supply is generally abundant. According to monitoring, raw milk production in the United States, the EU-27, New Zealand, Australia, the UK, and Argentina grew by 1.6% from November 2024 to November 2025. Domestic and foreign fresh milk prices have basically aligned: the equivalent price of fresh milk in the US is approximately 3,339 yuan/ton, and in New Zealand about 3,087 yuan/ton, showing a small gap compared to the domestic level of 3,030 yuan/ton. Coupled with the fact that New Zealand, a major source of China's dairy imports, is about to enter its off-season for milk production, dairy supply will tighten. It is expected that import prices will remain high, further weakening the shock to the domestic market. Meanwhile, domestic deep-processing capacity continues to be launched and released steadily, the domestic substitution effect continues to strengthen, and the industry's supply chain autonomy and controllability continue to improve.

(C) Industry Trends: Dual Drive of Policy Empowerment and Consumption Upgrading, Continuous Release of Growth Potential

Regarding industry development trends, the policy side continues to exert force. The favorable policies such as the School Milk Program and the National Nutrition Plan are advancing in depth, providing solid support for the industry's long-term steady development. On the demand side, the structure continues to optimize, with lower-tier markets and the elderly population becoming the core engines of consumption growth, and per capita dairy consumption steadily rising.

Accompanied by the wave of consumption upgrading, the demand characteristics of premiumization, functionalization, and freshness are becoming increasingly prominent. This will strongly drive the upstream farming side's demand for high-quality milk sources, driving the transformation of the entire industry chain towards high-quality development. Comparing horizontally, there is still a gap between China's current dairy consumption level and that of powerful dairy nations worldwide. The industry has broad growth space and huge potential.

III. Development Recommendations

To promote the continuous and healthy development of the dairy cow farming industry, cope with market fluctuations, and enhance overall industry competitiveness, the following recommendations are proposed for the farming, processing, and consumption sides, combining the 2025 operational situation and the 2026 development forecast:

(A) Farming Side: Focus on Quality Improvement and Cost Reduction to Stabilize Profitability Levels

Continuously optimize herd structure. Accelerate the culling of low-yield cows, focus on cultivating high-yield and high-quality dairy cow breeds, rely on advances in dairy cow breeding technology to continuously improve the yield per adult cow and fresh milk quality, aligning with downstream processing demands.
Promote precision feeding technology. Scientifically match daily rations according to different growth cycles and production stages of dairy cows to improve feed utilization rates. Simultaneously, leverage the advantage of low feed costs to further optimize cost structures and reduce farming costs.
Actively sign long-term purchase orders with dairy enterprises. Actively enter into long-term acquisition agreements with downstream dairy product companies to lock in fresh milk sales prices, effectively avoiding market price fluctuation risks and stabilizing revenue expectations on the farming side.

(B) Processing Side: Optimize Product Structure and Enhance Added Value

Focus on R&D and production of high-value-added and functional dairy products. Prioritize layout in high-growth tracks such as low-temperature milk, cheese, and cream, aligning with consumer demands for fresh, healthy, and diversified dairy products, and continuously increasing the proportion of high-value-added products.
Deepen synergy and binding with the upstream farming side. Build a stable and controllable milk source supply system, consolidate the foundation of high-quality fresh milk supply, and prevent risks such as significant price fluctuations and insufficient supply when milk sources are scarce.
Rely on domestic deep-processing capacity advantages to continuously promote domestic substitution. Strengthen R&D innovation and digital intelligence transformation capabilities, reduce dependence on imported dairy products, and improve production efficiency and product competitiveness.

(C) Consumption Side: Strengthen Channel Sinking and Conduct Popular Science Promotion

Increase efforts in channel sinking. Draw on the channel operation experience of leading dairy enterprises, improve channel layout in county and township markets, open up the "last kilometer" for products to reach consumers directly, and simultaneously expand emerging channels such as online e-commerce and community group buying to expand product coverage and tap into the consumption potential of lower-tier markets.
Strengthen popular science promotion of dairy products. Establish a long-term mechanism for category education, popularize knowledge on healthy milk drinking, strengthen consumer cognition regarding the freshness, health attributes, and nutritional value of dairy products, and promote the transformation of dairy products from optional consumption to a national necessity.
Further reduce terminal dairy product prices. Adhere to the orientation of people-friendly pricing and inclusive supply, reasonably compress circulation link costs, promote high-quality dairy product prices to be closer to residents' consumption capabilities, and enable ordinary consumers to "afford it, buy it often, and drink it long-term."

IV. Conclusion

Currently, affected by multiple factors such as the low operation of fresh milk prices and differentiated industry benefits, many domestic pastures are still in a difficult operating state, facing realistic challenges such as cost control and earnings pressure. Most small and medium-sized pastures are struggling near the break-even line. However, we must clearly recognize that this is precisely the "darkest moment before dawn" in the industry adjustment period. With milk prices having bottomed out, followed by the warming of consumer demand, the continuous release of policy benefits, and the acceleration of domestic substitution, milk prices are expected to rise steadily, and the industry's profitability environment will gradually improve.

Hardships reveal courage and perseverance; persistence leads to dawn. As long as pastures stay true to their original aspirations, hold their ground, continuously optimize herd structures, improve farming efficiency, strictly control operating costs, actively connect with downstream channels, and lock in long-term returns, they will surely traverse the industry cycle and tide over the current difficulties.

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