Economy

Cold comfort for farmers as milk sours

By Wei Tian (China Daily)
Updated: 2011-07-06 09:43

Past glory

Before the year 2000, most of the villagers in Qingbao were croppers. But the success of the dairy industry, as a result of the nation's rising standard of living, encouraged many of them to abandon their farmland and join the diary business.

"Soon 80 percent of the families were breeding cows," said Yang Shuying, 49, who has been raising cattle since 2004. According to her, a cow could sell for more than 20,000 yuan in 2004 - more than twice the current market price - but the dairy farmer wannabes would still rush to buy.

This generous level of input was driven by the promising output.

Around 7 or 8 years ago, the price of milk was pushed up by competition among several dairy companies, including Sanlu Group, a State-owned company based in Hebei, that later collapsed after it was implicated in the melamine scandal.

"The milk collectors were queuing to buy our produce," Yang said. "The quality standards were not very strict either, thus all the milk could sell very quickly."

But the good times did not last long.

In the wake of the melamine scandal, all the previously independent dairy farmers in Qingbao village were ordered to gather their cattle into one of the centralized farms to prevent any possible contamination of the milk.

Wangshengtan farm is one of many such "dairy communities" designed to help implement safety standards and for the convenience of milk collection. There are 1,500 communities of this kind in the province, raising 1.1 million cows across Hebei by the end of 2010, most of which are contracted to Yili or China Mengniu Dairy Co Ltd, another industry leader.

Zhang Haikuan, a regional manager with Yili, is in charge of sourcing and quality supervision of the milk from some of the more than 6,000 cows in the cities of Baoding and Shijiazhuang. He deals with some 120,000 liters every day.

According to Zhang, the entire milking process is inspected through CCTV installed in the milking parlor, where the collection is carried out mechanically and with no direct human contact with the milk.

The milk is then transported to the nearby processing center in refrigerated vans, which have GPS systems installed to track the route.

"I can guarantee you that the dairy products are the safest you can find among all foods in China today," Zhang said.

But the higher quality has not brought better prospects for the industry.

At Yang and Qiao's farm, which is contracted to Yili, the company now pays different prices for milk of varying degrees of quality. The price ranges between 3.2 yuan a liter for low quality milk - that with the lowest protein level and the highest level of bacteria - and 3.6 yuan for the highest quality.

The average price paid to Wang Shengtan, the owner of Wangshengtan farm, which is named after him, is 3.4 yuan.

He keeps between 10 and 20 percent of the money as an administration fee, and the farmers eventually receive about 2.8 yuan for each liter of milk sold. That's compared with the 2007 high of 3.6 yuan a liter.

"Yili sets the price and the farm owner gets the administration fee; they make money anyway. But we dairy farmers have to take all the risks," Yang said.

Wangshengtan's farmers once tried to appeal to the local government about the unreasonable purchasing-price mechanism, but say they never received a satisfactory response.

While the purchasing price is at a low ebb, rising costs are squeezing the profits of dairy farmers.

"The price of feed has doubled from 1,500 yuan a ton in 2007 to 3,000 a ton now, and our supplier has told us that it will rise again next month," Yang said.