Magazines Archives - 2007 October

China’s dairy farmers to get state help
Story 13

THE Chinese government will put in place initiatives by year-end to aid local dairy farmers facing the plight of growing costs and lower prices in the country’s booming dairy industry. The State Council has unveiled plans to provide these farmers with interest subsidies, extend their loan periods and offer them cash incentives of up to RMB500 (US$66.60) per breeding cow. In order to encourage farmers to buy insurance, the government intends to subsidise their premiums as well.

The government initiative to act was triggered when farmers stopped raising cows as a result of the rising cost of cattle feed and raw materials such as water, electricity and transport even as milk prices remain low. According to the China Dairy Association, about 40% of dairy farmers have been making losses and some have resorted to killing their cows for their meat.

Furthermore, farmers’ profit margins have been cut as dairy companies and retailers made no price adjustments despite growing costs. To make matters worse, dairy companies in their bid to gain market share have been caught in price wars that continually lower the retail prices of produce. This not only causes milk companies to lose revenue, which amounted to about RMB5 billion last year, but also further cannibalises the dairy-produce industry’s profit margins.

Despite being the world’s third-largest dairy producer, after India and the US, China’s annual per capita consumption is only about 25kg of milk yearly. On average, an estimated 29% of Chinese farmers have more than 20 cows each, yet the industry yielded more than 30 million tonnes of milk products last year, a surge of nearly 24% over the previous year.