After losing the "freedom" of instant noodles, we are gradually losing the "freedom" of milk.

Now the milk is becoming more and more expensive, in the past a box of 250ml of pure milk as little as two dollars and a half, now has risen to four dollars to start. At the same time, yogurt, also a dairy product, is "involution" more powerful.

Behind the milk price increase, is the domestic raw milk in the long-term supply and demand imbalance.

The domestic milk market itself compared to the rich livestock resources of New Zealand and European countries, the gap is large, when the domestic consumer demand for dairy products continues to increase, the gap is also rapidly expanding.

Relevant information shows that it is expected that by 2022, the domestic demand for raw milk will reach 570,000 tons, while the supply of raw milk is only 372,000 tons. Thus, under this situation, raw milk is becoming a market with huge demand.

On August 3, China's largest raw milk provider, Youran Herd, released a 2021 interim earnings announcement, expecting a substantial year-on-year increase in net profit of about 50% to 60% in the 2021 interim period.

As a leading player, has Youran Pastoral stepped into an uptrend?

"China's first stock in the upstream dairy industry"

You Ran Pastoral was founded in 1984, formerly known as Hohhot City Matching Feed Factory. after being acquired by Yili Dairy in 2000, it was until it was spun off in 2015, it has been a Yili It was a wholly owned subsidiary of Yili until it was spun off in 2015.

Relying on Yili's huge dairy products business line, You Ranch has a complete industrial chain. According to the website of Your Ranch, its business covers the entire upstream industry chain of the dairy industry, from breeding to feed, and from dairy farming to raw milk production.

According to the prospectus of Your Ranch, its core business mainly consists of two segments: raw milk business and ruminant farming systematic solutions.

Until 2020, ruminant farming systematic solutions had been the main source of revenue for Your Ranch, until 2020, when the raw milk business grew dramatically to overtake it.

This growth was driven by the acquisition of upstream dairy company SciStar for $2.2 billion in 2019, which led to a significant increase in raw milk production in 2020.

After the acquisition of SciStar, Uranium's position in the industry has been further consolidated.

According to Frost & Sullivan's statistics, as of June 30, 2020, Your Ranch ranked first in terms of cow inventory, with a 2,7% share, but was only 0.4% ahead of the second place; and in terms of raw milk production, Your Ranch was also in the first place, with a market share of about 4.7%, but with a difference of only 0.1% from the second place.

Overall, although Uranium is in the leading position in the industry, but compared to its competitors, its advantage is not obvious. And the key thing is that at this time, the Uranian pastoral industry has been caught in a fierce battle.

"Milk source scramble" is getting more and more intense, what are the hidden worries of the Uranian pastoral industry?

With the intensification of competition in the dairy industry, the battle for upstream milk sources is intensifying.

Milk is the core raw material in the dairy industry, and it is the key to the quality of the product, so the quality of the milk is the core strategic layout of all the dairy companies.

From the beginning of 2020, affected by the growth of domestic consumption demand for dairy products and the rising price of raw milk, major dairy companies have begun to expand the strategic layout of the milk source. Through the main self-built, mergers and acquisitions as a complementary way of high-quality milk sources to compete.

As the head of the dairy enterprises Mengniu has been in many places to build their own milk base, while the acquisition of Shengmu Gaoke dairy, used to expand their own in the milk source of the barriers. The company's first major acquisition was the purchase of the China Land Dairy, and the company's main source of supply for the dairy industry, which was listed on the Hong Kong Stock Exchange in mid-2020, is a major source of supply for the dairy industry, and the company's main source of supply for the dairy industry. In addition, Bright, Feihe and other dairy enterprises have joined the battle for the milk source, accelerating the layout of the milk source plate.

The dairy industry itself has a long industrial chain involving agriculture, animal husbandry, industry, and services. Because of the long supply chain, large dairies tend to split the upstream and downstream industry chains and support independent companies to take charge of the relevant sectors.

The upstream industry chain tends to be mainly responsible for the two segments of agriculture and animal husbandry, which include breeding, feed, breeding and raw milk production. The downstream industry chain, on the other hand, is responsible for dairy processing, product development, sales and other areas.

Compared with the downstream industry chain, the upstream industry chain has a huge gap in profits. Since 2008, the performance of upstream raw milk enterprises has been weak, and some of them have been in the red for a long time, until 2020. In contrast, the downstream dairy enterprises performed better, maintaining a steady upward trend after 2008.

As the upstream enterprises often rely only on the sale of raw milk to make profits, and more vulnerable to feed, labor and other cost increases, while the market price of raw milk will also bring greater fluctuations in the upstream enterprise revenue. The downstream processing companies can reduce costs by developing high-end products and raising prices.

Therefore, in 2017 most of the domestic small farms, individual feeding began to continue to reduce, large-scale farms gradually become the industry to help, and most of these farms have downstream dairy enterprises as the back of the back of the mountain.

This is also the case with Uranium, which was formerly a wholly owned subsidiary of Yili, and at the same time, Uranium's feed business and animal husbandry business are shaped through the integration of Yili's companies responsible for the relevant business, so it can be assumed that Uranium is the front-runner in the upstream industry chain of Yili's dairy industry.

When the competition for milk sources is intensifying in the downstream dairy enterprises, the problems faced by the upstream enterprise, Ullan Dairy, are mainly in two aspects.

1, internal factors: From the development of the course of You Ran Dairy can be found, You Ran Dairy and its dependence on Yili. Combined with the You Ranch revenue structure, its main revenue for raw milk business, which 90% of the sales are reached with Yili, which also means that the performance of You Ranch growth is largely subject to the constraints of Yili.

But the loss of Yili could be devastating for UBM. However, it's also important to realize that Unimicron is detached from Yili, and Yili is still one of its major shareholders, so it's unlikely to be pressured by the risks associated with it in the short term.

2. External factors: Your Ranch is facing fierce competition from other large farms. As mentioned above, large dairy companies are increasing their competition for milk sources and have increased their investment in upstream farms and mergers and acquisitions, as well as accelerating the construction of their own farms.

This means that in addition to facing competition from other existing large-scale farms, Upland Dairy will also face competition from newcomers in the future. These farms will likely attack Upland in terms of technology, capital, and market position.

In addition, in the ruminant farming systematic solution business, You Ranch may be subject to the impact of Internet enterprises.

Thanks to the development of the Internet era, big data, AI-based digital intelligent breeding system began to gradually penetrate the breeding industry. Now, in the pig market, has begun to have Internet enterprises to enter, Baidu, Jingdong, etc. have begun to try to utilize the relevant technology to empower the breeding industry, Ali has even launched the AI cattle solutions.

Although the current Internet companies in the ruminant farming solutions business has not yet formed a scale, but in the long term, may still be a threat to the relevant business of the Uranian pastoral industry.

With Yili as its backing, can Unimicron go its own way?

Throughout the dairy market, examples abound of upstream dairy companies relying too heavily on downstream dairy companies. But to explore the longer-term development, out of a belong to their own road is obviously indispensable. Based on this premise, Pinecone Finance believes that there are two directions in which Upland Dairy can focus its development in the future.

One of them is the smart farming system solution.

Currently, the trend of farm scale is increasing, especially large farms are becoming the mainstream of the development of upstream dairy enterprises. These large farms generally have more than 100 cows in stock, which means they need to consume a lot of labor costs to manage.

Therefore, for Upland Dairy, promoting the research and development of digital farming management system solutions will be one of the feasible development directions in the future.

Taking NetEase as an example, by integrating IoT, AI and other related technologies into all aspects of pig farming, the company uses big data to realize digital intelligent pig farming, improve the survival rate of pigs and farrowing rate, and rely on a reasonable feed allocation to improve the quality of pork. For example, NetEase has adopted a fully automated liquid grain feeding system in its pig farms, which allows for accurate feeding and indirectly reduces costs.

And the Uranian pastoral industry can use the relevant technology to cover the breeding, feeding, milking and other aspects of the industry chain, to realize the transformation of the industry digital intelligence, in order to improve the operational efficiency of the premise to reduce costs, and to achieve the output of the relevant technology.

The second is ruminant breeding technology.

At present, Your Ranch has initially formed a complete dairy industry upstream industry chain construction covering from breeding to raw milk production, and in the future, Your Ranch should emphasize on investing in ruminant breeding technology in addition to raw milk production as the main business.

You Ranch is one of the few domestic breeding companies that operates overseas breeding bull stations. In the prospectus, Youran Ranch mentioned that its subsidiary, SciStar, is the largest dairy breeding enterprise in China by sales of frozen semen for dairy cows in 2019. This means that Your Ranch will be able to go deeper into the research and development of cow genetic improvement technology and provide domestic dairy companies with high-quality cow resources.

Meanwhile, in the ruminant feed business, relying on its own existing dairy cattle breeding scale, Your Ranch will be able to increase its investment in the research and development of ruminant feed and other related technologies, and gradually increase its market share in the ruminant feed industry.

By tapping into new growth points in farming system solutions and ruminant breeding technology, this will help Your Ranch develop into a comprehensive agricultural biotechnology enterprise, and ultimately drive the enterprise to realize value growth.

Conclusion

Song Qinghui, a well-known economist, said in an interview with Wild Horse Finance, "The current pattern of domestic milk supply has basically taken shape, and the two giants, Mengniu and Yili, are the ones with the greatest power, while the other ones have a smaller share. The milk source of the world, the Uranian pastoral industry to Hong Kong listing or the milk source of the increasingly intense performance."

This means that for a long time to come, the domestic dairy industry will be in the turmoil of the competition for milk sources. And although the Uranian pastoral although backed by Yili, but this is not a long-term solution, looking for an independent, suitable for their own development path, is the Uranian pastoral thing to do.

All enterprises have a dream in their hearts, but to realize it, they have to rely on themselves.

By: squirrelfish

Text|songguo 财经 (ID: songguocaijing1)