The Milky Way to Recovering the Chinese Dairy Sector

CHINA - The central government Wednesday unveiled a robust plan to clean up and revive the dairy industry, which was hit hard by the recent milk contamination scandal.

20 November 2008

3 minute read

Asia

The plan, jointly prepared by 13 departments and made public on the website of the National Development and Reform Commission (NDRC), sets three targets for the industry's development, says ChinaDaily.

By the end of the year, milk supply, processing and sales should return to normal.
By the end of October next year, sound legislation and a standardized system on dairy products should be in place.
By the end of October 2011, the entire dairy industry must be standardized. About 30 percent of cows should be raised in big farms housing more than 100, and at least 70 percent of raw milk processed by a dairy company should come from its own farms instead of from individual farmers.

It is the first initiative spelling out clear development goals for the industry. Since mid-September, a number of dairy products from multiple producers were found contaminated with melamine, an industrial chemical blamed for killing at least four babies and sickening 53,000 others. The scandal has caused a nationwide, and even global, panic over Chinese-made milk products.

A statement about the plan, also published on the NDRC website, attributes the contamination to poor supervision, lack of standards, unscientific cattle raising, and uneven profit distribution between dairy farmers and firms.

"The contamination reflects long accumulated conflicts and problems. This plan is to solve these problems," it says.

The statement says the contamination case has caused a drop in sales of a large number of dairy products and forced suspension of production at many companies. Dairy farmers across the country have dumped vast quantities of raw milk and some even killed their cows, it says.

To solve the problems, the plan requires governments at all levels to subsidize farmers and provide favorable loans to dairy firms.

It says the authorities should support eligible dairy companies to issue bonds and raise capital from the stock market.

Another focus of the plan is to develop large, modern farms and regulate milk-collecting stations, which many experts believe to be the root of melamine contamination.

Figures from the China Dairy Association show that for the 19 million tons of dairy products produced in the first half of the year, milk was provided by 2 million farmers, who raise about 14.3 million cows.

"It's indeed easier for companies to oversee the quality of raw milk if it's from big farms," Zhao Yuanhua, spokeswoman for the dairy giant Mengniu, said.

She told China Daily Wednesday that the company plans to build 20 modern farms, each with more than 10,000 cows, in the next few years. "About 30 percent of raw milk that we process now comes from our own farms, but we're confident of meeting the 70 percent self-supply target by 2011," she said.

Zhao also said the plan will help upgrade the dairy industry. "It's good news for us big companies."

She added that sales of Mengniu products have recovered to about 80 percent of the level before the melamine scandal, and are likely to return to normal by the year-end.