20. China’s dairy chain

Abstract

This chapter presents an analysis of China’s dairy chain. The dairy market in China has grown rapidly. In the year 2000, raw cow milk production was 8.2 million t produced by 5 million dairy cows while in 2011, total raw cow milk production had risen to 36.5 million t, produced by 12,5 million dairy cows. Domestic and foreign companies invest in new production facilities in anticipation of the growing demand for dairy products. The 12th five year plan (policy goals and objectives set by the government) encourages the growth of the dairy sector and supports this with subsidies. China wants to be self-sufficient but the demand is growing faster than the production rate. The consumers are becoming wealthier and are able to afford more animal products and Western European products; this has an influence on the Chinese diet. Therefore, the Chinese government encourages collaboration with foreign countries to invest in knowledge, product development, process improvements and product quality and safety. China is a vast country but not all land is useful for agriculture. The northern provinces produce the largest part of the total milk supply, while the demand for dairy products is higher in the southern provinces. Subsidies are given to companies who are willing to invest in building a facility in China. For foreign companies, China is still attractive due to lower production costs but also due to the decreasing culture gap. The dairy (supply) chain has many players which makes securing a safe chain difficult. Since 2008 when the melamine scandal occurred, the chain has been altered by policy changes from the Chinese government. The number of players in the chain has been reduced by cutting out many ‘middleman’ who collected the milk from farmers and distributed it to collection centres or to local manufactures. Nowadays, all collection centres must be registered and must daily check and monitor the quality of the milk. Also due to the improvement of the cooling chain, the milk can be preserved longer. In 2010, there were 42 official registered stud bull stations. The China Dairy Association Data Center registers all bulls and their pedigrees. This serves as the studbook. The most common milk producing cows are: Scalper (better known as the Yellow cow) Buffalo and Yak with, respectively, 80, 15 and 10 million in 2007, and Holstein-Friesian with 12.5 million in 2009. On production quantity, China is competing with the largest producers in the world such as the USA. But on product quality, China is far behind the leading countries. Although the margins are low, many foreign countries invest in China by knowledge and set up partnerships, joint-ventures, sales points (local agents) or may even build their own facility, and thereby profit from the enormous growth in China’s dairy industry.