According to media reports, quite a few provinces and cities have suffered from “complications” caused by the shrinking milk price. Since cow killing and milk dumping was first exposed in Shandong province last year, it has been reported that cow-keepers in Qinghai, Henan and Zhejiang have also resorted to throwing out milk and killing their cows.

The monitoring data of the Ministry of Agriculture indicated that the average price of raw milk in China's major production areas in December 2014 was 9 percent lower than that in the beginning of the year. In Inner Mongolia, the falling purchasing price of raw milk has resulted in the shutdown of nine (accounting for 34.6 percent of the total number) of the milk powder producers in Inner Mongolia. In total, 8,356 metric tons of raw milk was refused by major dairy processers.

A total of 16,000 cows were eliminated unnaturally, which leads to a direct economic loss of nearly 190 million yuan.

On the one hand, the demand for domestic dairy products was weak; on the other hand, the import of dairy products increased dramatically. Between the past January and September, the domestic sales volume of dairy products was only 19.42 million metric tons, a decrease of 1.5 percent over the same period last year.

The slack demand also resulted in a substantial jump of inventory of key dairy producers. For example, the market value of inventory of Yili Group and Mengniu Group amounted to nearly 9 billion yuan. For the sake of cost-cutting and risk-aversion, some dairy producers resorted to purchase of (raw milk) on a limited basis or no purchase at all. However, China imported 1 million metric tons of milk powder in 2014, an increase of 64 percent year-on-year and 35 metric tons of normal-temperature milk, nearly twice as much as last year.