(Yicai) Feb. 20 -- Most of China’s raw milk producers have announced they expect to have achieved net losses last year because of the lingering supply glut in the industry.

AustAsia Group announced the Hong Kong-listed company expects to have raked in a net loss of between CNY450 million and CNY500 million (USD62.5 million and USD69.5 million) in the year ended Dec. 31, compared with a net profit of about CNY160 million the previous year.

Western Animal Husbandry predicted the Shenzhen-listed firm logged a net loss of CNY50 million to CNY65 million (USD7 million to USD9 million) last year, versus a net profit of CNY13 million the year before.

Meanwhile, China Modern Dairy Holdings announced on Feb. 16 that it expects its net profit to have shrunk between 66 percent and 72 percent to CNY160 million to CNY200 million (USD22.2 million to USD27.8 million) last year from the previous one, mainly because of the declines in sales revenue and asst valuation amid lower prices of milk and meat.

But as Modern Dairy achieved a net profit of CNY210 million in the first half of last year, the prediction means the company was in the red in the second half.

Raw milk companies may continue to face operating pressure in the short term as the oversupply problem continues amid increasing milk yield per cow and new farm capacity that is expected to come on stream in the coming years, even though the number of domestic cows declined by about one million last year, Song Liang, an independent dairy analyst, told Yicai.

Dairy companies purchase raw milk at government-guided prices, a manager at a large farm in Hebei province surnamed He, told Yicai, adding that he heard that if they cannot cannot sell the milk in time, they need to process it into milk powder to extend the storage period.

Prices of raw materials, including feed, dropped recently, so the farm can still maintain a break-even after eliminating unprofitable cows and buying feed from local suppliers despite the low milk prices, He noted.

But the farm may face rising operating pressure if milk prices continue to fall, as the period after the Chinese New Year is usually an off-season for dairy products, He said. Dairy companies should adopt a “small profit but quick turnover” strategy to stimulate consumption to help the companies along the whole supply chain to ease pressure, He added.

Editors: Tang Shihua, Futura Costaglione