Wednesday, October 1, 2008

How to Deal with the Melamine Problem

China's State Council issued a notice directing everybody to deal with the infant formula problem. On Oct. 1 (a holiday in China--normally nothing gets done all week) the Ministry of Agriculture web site carried news items from most of the provinces on how they are addressing the adulterated milk powder crisis. This illustrates China's latent central-planning instincts and its approach to regulation: the central government issues a directive and the responsibility is passed down to the province and then to the county and so on. Food safety regulation can vary widely depending on who is in charge in various communities and how much money is available.

The Ministry of Agriculture says there are exactly 152,653 inspectors checking milk stations nationwide. Exactly 18,803 had been checked and registered as of September 29.

Heilongjiang's article has the theme of "solving the issue of difficulty selling milk." The provincial government has organized exactly 8 guidance/inspection teams to carry out inspections of exactly 5,256 milk-collection stations to monitor and control milk marketing to ensure that milk is exactly 100% free of melamine. Another 8 teams made up of exactly 1,028 inspectors will inspect exactly 696 feed mills. (I'm amused by the obsession with numbers.)

Heilongjiang will "coordinate" dairy companies Wandashan, Flying Crane, Longdan, Daqing, Beiyinmei, and other companies to increase their purchases of raw milk. It is estimated that purchases of milk rose by 10,000 metric tons during Sept. 21-29.

Most of the provinces are in a frenzy to increase testing. Heilongjiang says its testing facilities are running at full capacity. Tianjin says it has 116 inspectors carrying out 24-hour monitoring. It has sent out 6 guidance groups to inspect 190 stations in 12 counties. Three non-compliant farms have been closed but no melamine has been detected. Jiangxi is forbidding award of new licenses to unlicensed dairies or restoring of revoked licenses.

Subsidies are being given to companies and local governments to upgrade testing capabilities. Jiangxi is assisting 5 key milk production counties in buying testing equipment. In Tianjin, one district is giving subsidies of 10,000 yuan to each milk station to purchase testing equipment. Another district aims to concentrate dairy cows in "livestock production zones"--areas within a village devoted to livestock--to better control and monitor cattle. The zones get a subsidy of 300 yuan each.

Shandong Province floated "ideas" that include subsidies for everyone: a one-time subsidy for milk stations that sign contracts to buy milk from farmers in October, a 5% subsidy to companies for dairy products sold during October, 3 months of free interest on loans for dairy processors to increase milk procurement between now and next March, subsidies of 50,000 or 100,000 yuan (depending on size of the company) for purchase of testing equipment, and subsidies for county government testing labs.

Among the articles about government inspectors and subsidies, there is one describing Nestle's system for ensuring the quality and safety of milk in Shuangcheng, a region in Heilongjiang. Nestle has 78 milk-buying stations in Shuangcheng that collect 1300 or so metric tons of milk daily from 240,000 farmers. The article describes how the process is carefully planned out with careful checks along the way. Milk station personnel are hired directly by the company to purchase milk from the farmers; they are not permitted to buy milk from intermediaries. Farmers have to apply for a registration with the company. If accepted, the farmer signs a contract that specifies quality requirements, price determination, and livestock-raising methods. Each cow is registered in the company's computer system. Each time the farmer delivers milk, the quantity is recorded. Payment is made by an automated system through a debit card. Milk is checked and tested at the milk station. It is kept refrigerated before and after the testing. Trucks are sealed with a seal unique to each station, and the seal is checked to make sure it is intact and recorded when it reaches the processing plant.

The Chinese government's approach to food safety typically relies on have labs, equipment, subsidies, and hardware in place. I have toured more labs than I can count in China, and the implicit message is, "Look, we've got imported equipment and technicians to test food. Problem solved." The real solution is in looking hard at the process and building in safeguards and controls as Nestle apparently has done.

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