Dim Sums: Agricultural Markets in China

China's imports of milk powder have been plummeting after the country created a glut that caused Chinese milk prices to plummet 30% over the last 4 years. Subsidies stimulated expansion of China's dairy industry at the same time growth in Chinese milk consumption shifted into reverse. Imports of value-added products such as cheese and whey protein have been more robust until now, but replacing these imports is one of the main solutions Chinese dairy industry leaders are pursuing to pull the industry out of its crisis. China's agriculture ministry held a symposium in Beijing on June 25 to discuss how to rescue China's dairy industry from plunging prices and financial losses. While it appears that excessive subsidies got the industry into the predicament in the first place, Minister of Agriculture Han Jun prodded local officials to pursue a lengthy menu of support measures that include farm and processor subsidies, credit support, breeding improvements, efforts to boost d...

Chinese propagandists are using pseudo-scientific testing to undermine consumers' confidence in foreign infant formula. On September 6-7, 2017, a Chinese Central TV (CCTV) "Consumer Advocate" program announced that 66 percent of foreign infant formula brands failed to meet Chinese standards, while all domestic brands passed the tests. News reports that Japanese and U.S. brands failed the tests were repackaged with the title "These Foreign Milk Powders Might Not Meet Standards; Does Your Family Buy Them?" and posted on dozens of Chinese web sites, such as the communist party's "red net" . A commentary on the nationalist Global Times web site followed up with, " Lesson from Chinese Milk Powder Counterattack ," describing the testing results as the Chinese infant formula's "Normandy invasion," a sign that the industry has recovered from its 2008 melamine crisis "Dunkirk." CCTV announced that 66% of infant for...

A new registration system for milk powder products in China is aimed at paring down the bewildering number of formulas and brands that crowd retail shelves, news media say. Milk powder products in a Chinese supermarket. New regulations announced last October require milk powder producers to register with China's Food and Drug Administration before the regulations come into force January 1, 2018. Companies will be permitted to register no more than 9 milk powder products: up to 3 milk formula lines, each with up to 3 formula products. Companies with R&D, inspection capacity, and their own production equipment are permitted to register. CFDA recently announced approval of 89 milk formula products submitted by the first set of 22 companies to register. Two more rounds of registration are expected before the January 1 deadline. China Economic Times  says the regulation is aimed at reducing the excessive number of brands and products. Statistics show there ...

China has the world's highest prices for powdered milk. This assessment came from the chairman of a large German dairy company in an interview with the reporter for a Shenzhen Newspaper. The article also quotes an agent for a foreign milk company who said infant formula produced by Abbott Labs and Mead Johnson that costs 150-to-160 yuan per can in southeast Asian countries costs nearly 200 yuan in China. The German company official attributed the high prices in China to high distribution costs and taxes on imported milk powder. He said his company has to market its products through dealers and distributors in China. The extra middlemen add costs that are avoided in Germany where they sell directly from the processor to the retailer. According to agents of multinational companies, many foreign companies entered the Chinese market after the melamine incident. They say there is no other country that has 100 or more powdered milk brands as China has. With so many brands, retaile...

During the last decade China's dairy industry was often described breathlessly as a major success story with endless potential, but the melamine milk adulteration crisis in 2008 revealed the industry's weak foundation of scattered farmers milking poorly-nourish cattle. Reports posted this week reveal that the industry still has not recovered and is in a serious predicament. Dairy farmers are squeezed between rising feed costs and downward pressure on milk prices, Meanwhile, processing companies are still preoccupied with marketing and have little inclination to develop reliable supplies of raw milk. A survey report from Hohhot, Inner Mongolia --the home base of two of China's biggest dairy companies--notes that small farmers with a few cows who benefited from the industry's frenetic growth in past years are now caught in a trap. They borrowed money with high interest loans to buy cows during the industry's flush years, but now they are losing money after several ...

Cartoon that appeared with a news report. The bottle reads "melamine milk powder" Law enforcement officials in the Nan'an District of Chongqing announced that a 38-year-old feed trader named Tang has been arrested for allegedly selling milk powder that contained melamine that far exceeded the legal limit. According to the report in the Chongqing Evening News , for the last 2 years Mr. Tang had been engaged in procuring milk powder from various places such as Guangdong and Zhejiang to sell to feed mills in Chongqing and Chengdu. The report says the business started in August 2009, when Tang went to a county near Shijiazhuang in Hebei Province to purchase milk powder. He spent 14,000 yuan buying up 6.75 metric tons of milk powder on that first deal, planning to sell most of it in Chongqing and some in Chengdu. Tang allegedly struck up a business relaionship with a counterpart named Zhang in Chongqing in 2009, doing 5 or 6 deals over the last two years. Zhang would receive t...

In the latest scandal to rock China's dairy industry, 3 children in Gansu Province were fatally poisoned by milk adulterated with nitrite, a chemical often used in curing meat. 75 people, mostly children, were hospitalized. This comes immediately after a massive inspection of dairy companies closed nearly half of them . After chronic problems with melamine adulteration, "leather milk", and other problems, last November the government announced that all dairy companies would have to be inspected to have their production licenses renewed. The inspections were originally to be completed by the end of 2010, but it was extended to March 31. Provincial technical supervision bureaus inspected dairy companies to make sure they have an acceptable factory layout and equipment that can test for 64 different substances, including melamine. Of China's 1,176 dairy companies, 426 have been shut down and 107 must stop production until they can meet the standards. In Zhejiang, 19 com...

In discussing food security Premier Wen Jiabao and Minister of Agriculture Han Changfu have recently adopted the line, "Chinese peoples' rice bowl must be in the hands of Chinese people," to emphasize that foreigners cannot be trusted to feed China. They may want to re-think that idea. Two more food safety scares--"cadmium rice" and "leather milk"--have surfaced this week. Scientists at Nanjing Agricultural University estimated that rice contaminated with the heavy metal cadmium is sold in about 10% of the markets in China. The Ministry of Agriculture plan for testing milk this year called attention to the practice of mixing toxic protein material extracted from leather products into watered-down milk. Cadmium from industrial and mining waste is absorbed from the soil into rice kernels. Official testing identified excessive cadmium as early as 2002. A Nanjing Ag University professor and his team did their own testing of samples from various markets aro...

Caijing Magazine's website reports today that an official with Yili, one of China's largest milk companies, said that the dairy industry is about to raise prices as the peak season for milk consumption arrives. The industry has been under rising cost pressure since August, presumably due to rising raw material prices, and profit margins have been shrinking. The vice director of Guangzhou City's milk office told the reporter that the industry is under great pressure and probably cannot avoid raising prices. They will probably concentrate on raising prices for premium high-value products. Factors behind the price increase include rising prices for raw milk and consumers' rising income and acceptance of higher prices. Comment: current conditions are strikingly similar to those of 3 years ago. In the fall of 2007 milk prices rose rapidly and the Chinese government imposed price controls. The rising costs and booming demand put pressure on margins and sent companies on a sc...

An article in New Capital Times discussed accusations by a handful of parents that infant formula caused the early onset of puberty in infants and young children. There is no conclusive link between early puberty and milk powder, but experts say it's possible there is a connection. The parents blame the formula since their babies didn't eat anything else that could have caused the phenomenon. This incident is not related to the melamine incident. A food safety expert asserted that hormones were not likely added in the manufacturing process. The chairman of the China Dairy Association agreed, noting that hormones would not add any value to the milk powder so there would be no incentive for manufacturers to add them. The dairy association chairman explains, "Hormones are not a permitted additive in milk powder. They can be detected with lab equipment, but tests are not currently required." He wondered if the hormones were introduced in the milk itself at the farm level...

Police in Shaanxi Province have announced the results of their investigation of how some melamine-tainted milk powder spread across the country last year. They have jailed three suspects (a fourth had a heart attack) and claim to have destroyed the powder that they tracked down. Some powder was sold to consumers in Shaanxi in 2008 and some candy made last year with tainted powder in southern China has been recalled. The Public Security Bureau of Shaanxi Province held a press conference in Weinan, a northwestern region of China, to announce the results of the investigation (and reassure the public). They laid out a complex trail of purchases and sales that originated in Weinan, led to candy factories in southern China and ultimately to stores in northeastern provinces. The chain of events started with 30 tons of milk powder produced by the Lihua dairy company in Dali county between April and August 2008. -They sold 20 tons to an individual named Ma Shuanglin. Authorities found that Lihu...

The Ministry of Agriculture held a training session for over 100 personnel engaged in dairy quality and safety monitoring. The article describes recovery in the industry. By October, the inventory of dairy cattle had risen 7 months in a row and reached 12.71 million head. Fresh milk output was 2.77 million metric tons, up 6.68%. Since last year 6,377 milk purchase stations have closed or been shut down. There are now 14,016 nationwide. Now there are 11,412 mechanized milking stations, 81.4% of the total, up 31.4 percentage points from last year. In 11 provinces, including Beijing, Henan and Jiangsu, accreditation of milk purchasing has been completed. The Ministry of Agriculture organized 13,129 checks of fresh milk and none had melamine over the specified limits, leather hydrolyzed protein, starch, alkalinity. Since the end of 2008, each level of veterinary stations have cracked down on adulterative substances. Around milk purchase stations and trucks, the two key points, deep launch ...

China's dairy industry is still reeling from the aftermath of last year's "Sanlu" melamine milk powder adulteration incident. The government has been busy trying to rectify the industry. Each province and county is doing its own thing with general guidance from the central government, but there are common themes. One major thrust is to eliminate competition among milk collection stations. In Inner Mongolia, raw milk supply has been carved up into territories, and each processing company is assigned a territory; they can't buy outside their territory--a monopsony. For example, Helin village in Inner Mongolia used to have 2 milk stations affiliated with Yili Company, 3 affiliated with Mengniu Co., and 3 bulk milk collection points. when milk was in short supply, companies would compete for supplies from these stations. Now everyone in Helin village sells to 2 of the Mengniu stations. A third station is being reorganized; the others have been closed down. Both Mengni...

A dairy industry conference was held in Beijing on January 19 to “discuss” experiences and measures to address food safety problems. Although the conference was held by the “China Dairy Industry Association,” the head of the Ministry of Agriculture’s (MOA) Livestock Industry Office is listed as the first chairperson, followed by the head of the dairy association. The MOA official’s comments are featured in a paragraph followed by a paragraph of comments by the dairy industry association head. Listing the MOA official first is a reminder of government's centrality in food safety in China. (In many industries, even the “industry association” itself is a thinly disguised government planning bureau.) Representatives of the big dairy companies and regional associations were also present but their views are not revealed. Among dairy companies there have been two approaches to tightening up their supply chains. Guangming, Sanyuan, Yinqiao, and Flying Goose have concentrated on developing ...

According to the Economic Observer newspaper, Chinese residents desperate for safe milk powder after the melamine adulteration incident are importing foreign milk powder through the mail. The postal bureau in Suzhou reported that it processed 65 shipments amounting to over 750 kg. of milk powder during October 1-15. Meanwhile, the Harbin Daily boasts (with no apologies or concerns) that Heilongjiang Province has been pumping out record-setting exports of milk powder. Heilongjiang Province exported 30,000 metric tons of milk powder during the first 9 months of 2008, a 40% increase from last year. That was 51.5% of the whole country's exports. Major markets for the stuff were Venezuela (joke's on you Comrade Chavez), Africa, Taiwan and Hong Kong. In other Chinese dairy news, third quarter financial reports for major dairy companies were grim. Sales were down and losses of several hundred million yuan were reported for major companies. The exception was Beijing Sanyuan whose milk ...

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 guidanc...

Illnesses due to tainted milk powder now exceed 6,000 and 3 deaths. Powder from the biggest dairy companies in China have all tested positive for adulteration with melamine. Test results showed melamine present in samples of 69 products from 22 brands of milk powder tested, 14% of the products and 20% of the brands tested. There were 87 brands that were free of melamine in the tests. According to the State Council , there are 175 milk powder producers nationwide, of which 66 have stopped production. The 69 products that tested positive are not allowed to leave the factory. All 11 Sanlu brand samples tested positive with far higher concentration of melamine than any other brand. The two biggest companies were not free of melamine but were not among the worst performers: Yili had 1 out of 38 samples test positive and Mengniu had 3 out of 28 positive. Sanlu's concentration of 2563 mg/kg was much higher than 68.2 mg/kg for Mengniu and 12 mg/kg for Yili. The vice-secretary and mayor of ...

Over 1,250 (so far, the number keeps rising day by day) babies have become sick and two have died from consuming infant formula adulterated with melamine—a chemical derived from coal. This scandal combines elements from two of China’s biggest food safety incidents. You’ll recall that the big publicity about food safety problems with Chinese food imports started in 2007 when dog and cat deaths were linked to melamine. China’s watershed domestic food safety incident came in 2004 when a series of babies died from malnutrition due to fake infant formula that had little nutritive value. The latest problem is centered in Gansu Province in western China where babies had been showing up at hospitals with kidney stone problems since March or April of this year. The link among the cases was that all the babies consumed the same brand of milk powder. According to the Chinese Xinhua article of Sept 11 , the condition found in the babies is usually the result of poor nutrition typically found only ...