The no-promotion practice in Beijing and Harbin, two cities with a steady dairy consumption, was carried out in accordance with an agreement signed on June 21 by 14 dairy producers and will later be expanded to other major cities such as Shanghai, Guangzhou and Chengdu.

The dairy enterprises, including leading players Mengniu, Yili, and Bright Dairy & Food, hold a 90-percent share of the country's market.

A salesperson of dairy products in a supermarket in Beijing said the price of packaged milk had also risen on top of the promotion being canceled.

"The present price of domestic dairy products is nearly the same as that in 2005," said Fan Xueshan, director of the Beijing Creamery Association, "but the breeding cost of cows has increased a lot in recent years."

Statistics showed the price of corn, a major raw material for feedstuff, rose 14.7 percent in the first half of the year and registered a ten-year average high between January and April.

The tight supply of raw material imports also contributed to the rise in costs. Powdered milk output from New Zealand and Australia, China's major importing partners, decreased due to drought.

Source: China Daily