Rapid growth led China dairy industry to cut corners
Reuters, Wednesday September 17 2008
(Repeats, fixing typo in sixth paragraph)
By Lucy Hornby
BEIJING, Sept 17 (Reuters) - Overly rapid investment in China\'s dairy industry coupled with a lack of quality control over thousands of inexperienced farmers tempted players to cut corners, ultimately leading to illness in thousands of infants, industry experts said on Wednesday.
Melamine, a compound that mimics protein, has been found in milk products sold by 22 out of 109 Chinese firms, after it was blamed for an unusual outbreak of kidney stones in babies using milk powder this month. Three babies have died [ID:nSP157078].
China\'s dairy industry started from scratch about 20 years ago, and was bolstered by demand from foreign companies just setting up in the country. Top leaders encouraged its development to improve nutrition, especially calcium consumption by children.
In 2006, the country produced 32.2 million tonnes of milk, up from 8.6 million tonnes in 2000. The growth in production capacity outpaced the growth in demand or in refrigerated transport systems, and inexperienced farmers who had rushed into the industry cut corners to survive.
The blind expansion in the dairy industry has resulted in ignorance about quality and also the use of melamine, said Fang Yan, deputy director general of the rural economy department, at the National Development and Reform Commission.
Farmers are used to raising dairy cows in the same way as meat cows, resulting in lower protein content in the milk. When they sold the low-protein milk to dairy plants, they were rejected and as a result some added melamine to the milk.
Many of China\'s dairy processors buy milk from dealers, who aggregate milk from farmers. The set-up has complicated quality regulation more than if processors sourced from farms they controlled, said Matthew Crabbe of Access Asia, who has studied the industry in China.
The four people arrested so far, as China struggles to contain the widespread abuse, have been milk dealers.
As the industry expanded, often fuelled by subsidies, dairy herds in the north exceeded demand in the cities in the south. Constrained collection and distribution networks are particularly a problem for the dairy industry, which is reliant on refrigeration and quick access to markets.
In 2006, China had about 1,600 dairy producers with a total annual capacity exceeding 50 million tonnes, far above the amount that was actually produced.
Some desperate dairy farmers slaughtered cows as beef prices rose faster than milk, while others cut corners to compete with the newer, much larger industrial farms being set up.
There are thousands of farmers, with half a dozen to a dozen cows, struggling to make ends meet, Crabbe said.
Obviously, the temptation when the price of milk doesn\'t go anywhere is to bulk it up. (Additional reporting by Niu Shuping in Dalian; Editing by Nick Macfie)