Domestic dairy producers despair amid import surge

A farmer in Yanqing district of Beijing pours milk down the drain. The Ministry of Agriculture plans to offer more subsidies to dairy farmers who have been suffering from plunging milk prices. [Photo/China Daily]

According to the General Administration of Customs, the country imported 320,000 tons of liquid milk in 2014,up 70 percent from the previous year. Import of milk powder excluding infant formula rose 9 percent year-on-year to 930,000 tons, and that of infant formula increased to 121,000 tons in 2014,roughly the same level as a year earlier.

About 27.7 percent of the imports were from the Netherlands, followed by 14.1percent from Ireland, 13.5 percent from France, 10.3 percent from Denmark and 8.6 percent from New Zealand. The five countries accounted for 74.2 percent of total formula milk powder imported last year.

Li Liuhang, director of the Shandong provincial dairy management office, said the prices of fresh domestic milk have been dropping monthly since February last year and now sit at a round 4.5 yuan per kg on average. The province, with 1.25 million cows and total output of 2.71 million tons, is the country's fifth-largest milk producer.

Official figures show raw milk prices remain stable at larger farms but small-scale operations have suffered, with prices falling as low as 1 yuan per kg in some regions.

Chen Rongwei, deputy director at the China Dairy Industry Association, said it was the massive import of milk powder in 2013 by dairy processing companies that first accelerated the drop in domestic milk prices, and subsequently the collapse in milk collection from farmers.

Song Liang, a dairy analyst, said growing consumer preference for imported milk has also been fuelled by worries over the safety of some domestic milk and milk products, particularly milkpowder.

Industry analysts fear that if domestic raw milk prices keep dropping this year, and the massive inventories at some of the larger companies remain high, more farmers in more regions will be forced to pour their milk down the drain, or kill their animals.

Earlier this month, the Ministry of Agriculture instructed farming departments at all government levels to help dairy farmers sell their milk. These included urging processing companies to closely monitor sales of fresh milk and offer subsidies to farmers.

Local governments are also being asked to offer financing to farmers who have been affected by the slump in demand.

According to a ministry circular, local dairy departments have already been asked to set up reporting systems to record the weights and numbers of dairy products being declined, collected, or poured away.

Li Shengli, chief scientist at the National Modern Dairy Industry Technological System and a professor at the China Agricultural University, said China's dairy consumption should be dominated by pasteurized milk, and not room-temperature milk products which have a very short expiration period.

Shen Danyang, spokesman for the Ministry of Commerce, said on Jan 21 that imported milk powder should not be blamed as the only culprit for farmers' doldrums.

Shen also highlighted the large gap between prices of domestic and over sea dairy products, rising imported dairy products, and low levels of technology used by domes-tic dairy producers, noting that the industry has historically suffered from fluctuating levels of supply and demand, in both domestic supply and also imports.

For example, Shen said, dairy imports have been growing at more than 20 percent over the past five years, even rising 37 percent in 2013.