Milk dumping urges competitive dairy industry

The reputation of China's domestic dairy industry has been badly damaged by production-related scandals and despite demand, farmers have turned to dumping milk and slaughtering cows to cut their losses.

This situation, coupled with plummeting milk prices globally last year, means that measures must be taken to heighten the competitiveness of the dairy industry.

A CLOUDY HISTORY

Milk dumping is not a new phenomenon in China.

Multiple factors have led to the current surplus in domestic dairy market, with accusations of substandard milk production due to poor supporting facilities damaging the sector.

This has resulted in many buyers simply refusing to honor their purchase contracts, a situation that especially effects individual and small-hold dairy farmers.

Domestic dairy companies established their own farms to guarantee the supply and quality of fresh milk. But dairy firm Sanlu, once the market leader, was hit so hard by a 2008 scandal over melamine-tainted baby formula that it could not bounce back, and was declared bankrupt.

The second half of 2013 was characterized by a shortage of fresh milk, so many farmers invested in dairy cows to capitalize on the lucrative opportunity. However, the high costs associated with milk production meant that the issues of quality and confidence began to rear their ugly heads again.

After a serious drop in demand at the end of last year, dairy farmers in several provinces again began to throw away milk and sell their herds.

CONFIDENCE AT HOME

Many young couples avoid domestic brands of baby formula, while other people will only drink foreign milk brands. They do not trust the quality of local brands.

Certain milk producers have embarked on heavy promotional activities in malls and supermarkets in an effort to inject confidence in the domestic milk market.

China's per-capita milk product consumption is less than one third of the world average. Therefore, there is still plenty of potential to further exploit milk consumption among its 1.3 billion people.

But before products can be marketed to customers, the domestic dairy industry must be modernized and streamlined, so as to enhance production and reduce costs. Otherwise it cannot compete at home, let alone internationally.

Dairy cooperatives and associations must be more active in protecting the interests of farmers, by stabilizing prices and supervising production.

The government must also protect the interests of dairy farmers and initiate the necessary regulations to ensure a strong and stable dairy industry.