Sunday, June 16, 2013

Alfalfa and Dairy in China

Just like people, animals need a healthy diet to grow muscles, give milk or whatever. China's dairy industry neglected this basic fact when it began expanding by 15-20 percent annually during the early 2000s decade, and the result was undernourished and often diseased cattle that gave low quality milk. Milk was watered down and laced with melamine to fool protein tests and babies died, undermining confidence in the product that still hasn't been restored.

Now Chinese dairy farms and officials are paying more attention to the quality of feed for dairy cows. In 2012, the Ministry of Agriculture launched a program to boost production of alfalfa, a clover-like plant that is used primarily as a feed for dairy cattle. Compared with other types of hay/forage crops, it produces high yield and has rich nutritional content. On June 7, China's Ministry of Agriculture held an alfalfa development promotion activity in Jinzhou, Liaoning Province, to draw attention to the campaign.

At the promotion activity, vice minister of agriculture Gao Jibin observed that, "China's dairy industry is in a new stage of development, rising like a phoenix from the ashes" after the 2008 melamine crisis. He noted that the herd of dairy cattle has risen 17 percent since 2008 (but he also said milk output has increased only 2.5 percent), and he expects urbanization and population growth to lead to a doubling of dairy consumption in China by 2020.
Vice Minister Gao inspects alfalfa plants in Jinzhou (source: MOA).

Gao called the Chinese government's support of the alfalfa campaign since 2012 a major breakthrough in the dairy industry's recovery. Gao said alfalfa production in 12 key districts now was 23.6 million mu (1.6 million hectares) in 2012, an increase of 1.5 million mu from the year before. China's alfalfa production, said Gao, is now 500,000 metric tons, and he said output increased by 300,000 mt this year alone.

Gao said alfalfa raises milk output per cow, improves the protein and fat content of milk, reduces bacteria counts, and improves the health of animals by reducing acidosis and other metabolic diseases. Gao claimed that higher cow productivity from consuming alfalfa boosts farmers' gross income by 1,300 yuan per year and reduces veterinary expenses by 200 yuan. He the dairy industry's transition from small-scale scattered cow-raisers to "standardized" dairy farms is increasing the demand for alfalfa, and support for production of alfalfa aids the industry's "transformation."

The government is spending 525 million yuan (about US$ 85 million) annually on the alfalfa campaign. The government packages subsidies for seed and machinery purchases to encourage alfalfa production and probably includes other spending for infrastructure, company loans, and other expenses. The program has developed 500,000 mu (82,000 acres) of alfalfa "demonstration districts" and plans to expand it to 2 million mu by 2015.
Machines (presumably subsidized) harvest alfalfa (source: MOA).

An article on the alfalfa campaign in Shandong Province explains that the program is motivated by rising prices of imported alfalfa. An alfalfa dealer in Shandong says that the price of imported alfalfa was 3000 yuan/mt by the time it reached Binzhou in Shandong during 2011. (By comparison, corn was about 2000 yuan/mt at the time.) He said that domestic alfalfa was 1600-1800 yuan/mt. He also said he sold 520 mt of imported and 1360 mt of domestic alfalfa to 6 or 7 large dairy farms in Shandong and Jiangsu Provinces, and demand exceeds supply. The company grows alfalfa on its own 580 acres and also procures it from some local farmers. According to the article, many farmers in eastern Shandong have switched from growing cotton to alfalfa since expenses are lower and returns are better.

A 2008 article from China Agriculture University's grassland research center reveals that alfalfa production was crowded out by an expansion of grain output over the past decade. In explaining why alfalfa supplies were tight in 2008, the article reported that many farmers converted alfalfa fields to grain production after Chinese officials began urging farmers to plant more grain and started giving grain subsidies in 2004. The article said that alfalfa production plunged by nearly half during 2004-07. The decline in alfalfa occurred at the same time milk prices were soaring in 2007-08, prompting milk companies to expand production and sales as fast as they could. By implication, the campaign to boost grain output reduced feed available for dairy, and contributed to the melamine adulteration crisis in 2008.

From the perspective of sustainability of China's agriculture, growing alfalfa is a positive step. Like other legumes (including soybeans), alfalfa can take nitrogen out of the atmosphere instead of sucking it out of the soil. Mono-cropped corn, the crop that has crowded out legumes on large tracts of Chinese farmland, requires application of large amounts of nitrogen fertilizer.

The alfalfa campaign was probably prompted by the surge of alfalfa imports. In 2012, China customs statistics reported that over 450,000 metric tons of alfalfa was imported, a 58-percent increase from 2011. The 500,000-ton domestic production figure reported above by Mr. Gao slightly exceeds last year's imports. That's probably no coincidence--Chinese officials always get antsy when imports of any commodity surge rapidly, especially when imports exceed domestic production. (Officials launched an antidumping investigation when imports of distillers dried grains first exceeded domestic output several  years ago.)

In 2012, border quarantine officials in Jiangsu Province said they discovered a fungus called verticillium albo-atrum on a shipment of U.S. alfalfa which they claim is a threat to Chinese alfalfa, potatoes and vegetable crops. Chinese officials have demanded that the company that supplied the infected shipment no longer export to China and they have strengthened inspection of alfalfa shipments.

A Chinese seed supplier reports that some seed companies have had difficulties importing seed in 2013 due to a "policy reform" carried out by agricultural and forestry departments. According to the article, this has affected the supply of seeds during the April-June planting period in 2013 and the only imported seeds available are leftover inventory from 2012. The company claims to have more supplies soon to arrive at ports.

Watch out, Chinese officials. China's boom in alfalfa imports has come during a time of unusually high hay prices caused by severe drought in the United States over the last few years that has hit hay-producing areas especially hard. Some Americans have criticized U.S. export of alfalfa to China because it is, in effect, an export of scarce water from California.

In China, imported alfalfa is now about 1000 yuan more expensive than Chinese alfalfa now, yet Chinese dairy farms are clamoring for U.S. alfalfa. When rain finally comes to U.S. hay fields and prices fall, China's alfalfa imports will accelerate even more. At some point, competition from cheaper, better-quality imported alfalfa could undermine China's domestic alfalfa production campaign.

1 comment:

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