China's dairy production never really took off until dairy companies started recruiting small farmers in the hinterland to milk cows a few at a time. Until then, most dairy farms were on city outskirts where feed was scarce and costs were high. But now, the Chinese industry appears to be reversing course to a large-scale farming model.
Milk production in China never really took off until ultra-high temperature (UHT) technology permitted milk to be produced in the hinterland by millions of scattered herdsmen and transported to urban markets without spoiling. That didn't end well, though. Scattered production and frenetic growth with thin margins and no control led to the melamine incident in 2008 which ground the industry's growth to a halt.
Following the melamine incident there has been a
surge of investment in large-scale dairy farms that has reversed the strategy
that created frenetic growth during the last decade. Government authorities have pushed processors to procure milk from
company-owned farms or from a fixed aggregation of farmers who keep their cows
together in a centralized location. The surge of investment is reversing the course of dairy development, moving it back toward big, high-overhead operations.
A scan of news reports and project
descriptions shows a surge of large investments in farms with thousands of cows.
The examples below are mostly in western provinces and farms range from 2000 to
5000 head with planned investment per cow works out to about $3200-$6000, not
that high by western standards. But the tens of millions of dollars freezes out small farmers. Most of the projects are led by local animal husbandry
bureaus and are recruiting investors who probably have little or no knowledge
of farming. Several projects mention that land for the farms has been leased
from farmers. In effect, dairy farming in China has returned to a large-scale
employee-operated mode of operation similar to the poorly-run state farms of
past decades.
Sample Chinese dairy farm projects announced during 2012-13
Location
|
Number of cattle
|
Investment
|
Gansu, Jingyuan County
|
5000
|
RMB 120 millon
|
Gansu, Minhe County
|
2000
|
RMB 180 million
|
Inner Mongolia, Hohhot, Yuquan District
|
3000
|
RMB 62 million
|
Heilongjiang, Harbin
|
2000
|
NA
|
Qinghai, Huzhu County
|
3000
|
RMB 60 million
|
Shaanxi, Weinan Prefecture
|
2000
|
RMB 50 million
|
Shandong, Dongying
|
3000
|
US$ 15 million
|
Inner Mongolia, Tuzuo Banner
|
5000
|
RMB 145.3 million
|
Ningxia State Farm System
|
Add 100,000 by 2015
|
NA
|
Shaanxi, Heyang County
|
7000
|
RMB 280 million
|
Source: Chinese news reports and project descriptions.
|
Most projects include thousands of cows, a barn, one or more milking parlors, storage for feed and silage, manure handling and gasification facilities. They mostly don’t mention anything about sources of feed. Two projects mention that they have several hundred mu of land (about 50 to 100 acres) which doesn’t seem adequate for thousands of cattle.
One ambitious county-wide project in Shaanxi Province plans to
build two 1000 head farms, four 500-head farms, and ten 300-head farms plus a
dairy processing project from 2012 to 2017. The county is on a shopping spree for
Australian cattle. In 2012 they brought in 2000 head with a total subsidy of
11,200 yuan each (split between the province, prefecture and county). They plan
to bring in another 10,000 australian cattle by 2016.
The county promises investors access to a dizzying array of subsidies. There is a 500-yuan annual interest subsidy per farm for a loan
of 10,000 yuan. Grants for farms of varying sizes are approximately 500 yuan
per head. Farms get a 50-yuan-per-mu subsidy for buying alfalfa seed if they
can consolidate a 500-mu parcel of land.
Farms in the county can also benefit discounted water and electricity rate
and from various rural construction subsidy programs for roads, drinking water,
and electricity. Machinery purchases are subsidized by the national program. Other policy support includes an artificial insemination subsidy
of 100 yuan per attempt and a one-time 2000-yuan subsidy to set up an on-farm
frozen semen station. Insurance for cattle is subsidized and organized by the
county. There are free mandatory immunizations and testing for brucellosis and
tuberculosis.
An October 2012 article in a veterinary publication paints a
grim picture of the dairy farming industry in China since the melamine crisis. Rising
feed and labor costs have crimped farm profits, as have disease problems. When cows
get sick you have to stop milking them for ten days or more. Meanwhile, milk
prices have been stagnant and many farmers complain that milk sells for the
same price as bottled water.
The article says most Chinese dairy farmers lack scientific and
specialized knowledge, and have a hard time controlling disease. It calls for a
consolidation of the dairy processing industry by “guiding” companies through
mergers and acquisitions to “weed out” excess capacity and foster more “dragon
head” enterprises. The author thinks government guidance, the price lever and
other methods can be used to lower enterprise cost and to raise the China dairy
industry’s influence and competitiveness.
No comments:
Post a Comment