Everbright Securities: From destocking to milk reduction, the raw milk cycle inflection point is approaching.

Everbright Securities released a research report stating that earlier capacity expansion in upstream dairy farming, combined with weak post-pandemic downstream demand, created a supply-demand gap that drove raw milk prices steadily downward. Since 2025, with continued cattle destocking and stable demand, raw milk prices have fluctuated at the bottom. Entering 2026, beef cattle prices have risen further, destocking continues, and raw milk prices are showing signs of recovery. Moreover, during this round of destocking, leading farms have demonstrated stronger risk resistance, while small and medium-sized farms have been gradually phased out, increasing industry concentration. As leading farms, Youran Dairy and Modern Dairy, backed by leading dairy enterprises represented by Yili and Mengniu, have expanded their herds against the trend in recent years, and are expected to broaden their competitive advantages in the subsequent period of stabilizing and rising milk prices. Combined with expectations for improved biological asset impairment, greater profit elasticity is expected to be unleashed.