Research Report on China's Dairy Cattle Farming Industry

Research Report on China's Dairy Cattle Farming Industry published by Beijing Orient Agribusiness Consultant in March, 2010. This report consists of 134 Pages and the price starts from US $ 5900.

Introduction

Abstract

Research Background

Both the national economy and the income of urban and rural residents rose quickly in the past decade, and the dairy industry gained a substantial development thanks to Government promotion, mobilization from the processing industry, consumption and export demand, and rising of residents' conscience on nutrition and health care. China grew into a big dairy country from one that was short of milk. The national cow milk output rose from 6,011,000 tons in 1997 to 35,127,000 tons in 2007, and dairy cattle inventory from 4,265,000 to 13,879,000 during the same period of time, up by 2.25 folds and 4.84 folds respectively. And, the yield of the whole herd rose from 1,409,000kg to 2,531,000kg, up by 79.58%. Mengniu and Yili, the two largest dairy companies in China, saw over 20 billion yuan of yearly sales revenue in 2008, and are in the world top 20 of dairy companies from the perspective of scale. In general, China' s dairy industry went through a track of quantity expansion in the past decade, whereas there are lots of deep-rooted contradictions and problems, which are mainly (1) low percentage of elite dairy cattle breeds and poor milk yield level. In 2006, the dairy cattle inventory was 13.632 million in the nation, of which pure-breed Holstein cattle around 35%, lots of the Holstein cattle reared in the crop producing regions and pastoral regions are cross breeds between Holstein and local cows, making up around 35-40%. In addition, there are 2 million dairy/beef cattle reared in Inner Mongolia and Xinjiang for both milk and meat purposes, including Xinjiang Brown Cattle, Grassland Red Cattle, Sanhe Cattle, Simmental and etc., and the cow yield is less than 2,000kg. China Holstein pure breed, the mainstream breed of dairy cattle in China, has a big gap with developed countries in various production performance indicators, and the milk yield (4,100kg average cow yield) is merely 60% of the world advanced level. The percentage of elite breeds is poor, Holstein pure-breed cattle and local cross breeds aggregate less than 80% of the total. Breeding capability with special characteristics is at a low level, some places even suffer from degradation. (2) Low scaled farming level and backward feeding methods. Dairy farming is based on smallholder farmers, and 80% of the dairy cattle in the nation are reared by farmers with inventory less than 10. (3) Poor ratio of quality coarse feed. The composition of dairy cattle feed is not based on a scientific formula, and the conventional feed for most of the cattle is coarse feed based on corn stalk. There is lacking of quality coarse feed, specially quality alfalfa or other fodder. This restrains further improvement of production performance of dairy cattle and is a crucial factor for nutrition metabolism diseases. (4) Poor raw milk quality and low procurement standard. Neither the physical nor the chemical indices or the hygienic indices of raw milk quality is ideal, the hygienic indices of raw milk are worrisome and related standards can hardly meet the international norms. (5) There is high incidence of primary diseases of dairy cattle, and epidemic control, quarantine or supervision system is outdated. Alongside the rising of "popularity of dairy cattle" nationwide in recent years, there has been "popularity of cattle trading" as well. There are outbreaks of cattle tuberculosis, Paratuberculosis and Brucelliasis in certain places in China, and there is a trend of proliferation. (6) The development of dairy farmers' cooperatives is outdated, becoming a bottle neck of the sustainable development of the dairy industry.

2008 saw the outbreak of the "Sanlu infant' s formula milk incident" or "melamine incident". The national dairy industrial chain was seriously affected, and the incident was attributable to raw milk. After the incident, smallholder farmers confronted with unprecedented difficulties and elimination by the market. Also after the incident, the dairy cattle inventory fell noticeably, dropping to 13 million in the end of 2008, and there was a further shrinkage to 12 million in the first quarter of 2009. The dairy farming industry in China is about to see a profound restructuring. Since the melamine incident in 2008, the Government has strengthened regulating and administration over the whole dairy industrial chain, especially regulating and administration over dairy farming has reached an unprecedented level. Among the policies and regulations promulgated by the Government, the representative ones are the "Administrative Rules of Dairy Product Quality, Safety and Supervision" and the "Food Safety Law". The melamine incident resulted to pacing up of the transition of China' s dairy farming mode, i.e., shifting from extensive quantity expansion to scaled and intensive farming with quality and efficiency.

By far, the dairy industry has grown from small to big, however, compared with the mature dairy industry of developed countries, China' s dairy farming industry is still at an infant stage and should learn from the advanced countries. The dairy farming industry of China has a huge demand for foreign resource thanks to the accelerated transfer of farming mode and the related profound reform. Based on concrete data, this report illustrates the current status and the trend of the dairy farming industry of China after a study on the whole dairy farming chain in the past decade and especially after the melamine incident. This report is composed by the top think tank of China' s dairy industry, and is a rare reference for companies, institutions or researchers who wish to benefit from the huge development opportunity of China' s dairy farming industry after the melamine incident.

Table of Contents

Research Background 1

Summary 1

1. Overview of China' s Dairy Market 5

• 1.1 Growing Trend of Processing Industry of Milk and Dairy Products 5
  • 1.1.1 Dairy Cattle Inventory 5
  • 1.1.2 Milk Production 5
  • 1.1.3 Cow Yield 5
  • 1.1.4 Dairy Cattle Farming Scale 6
  • 1.1.5 Liquid Milk Production 6
  • 1.1.6 Production of Dry Dairy Products 7
  • 1.1.7 Per Capita Milk Possession Volume 8
  • 1.1.8 Trade of Dairy Products and Dairy Animals 9
• 1.2 Gradual Improvement of Dairy Farming Industry in National Economy 11
• 1.3 China Shifted from Milk-insufficiency to Big Producer of Milk in the World 12
• 1.4 Time Is Needed for China to Shift from A Big Milk Producer to A Competitive Milk

2. Analysis of Policies and Regulations on Dairy Farming Industry in China 14

• 2.1 Comments on Promotion of Constant and Healthy Development of Dairy Industry from the State Council (Guo Fa [2007] 31) 14
• 2.2 Administrative Rules on Dairy Quality and Safety Supervision 16
• 2.3 Plan on Dairy Industry Rectification and Vitalization 16
• 2.4 Industrial Policy on Dairy Processing (2009 amendment) 19
• 2.5 Regulating Raw Milk Market Order 21
• 2.6 Regulating Raw Milk Pricing Mechanism 22
• 2.7 Subsidy for Elite Breeds 23
• 2.8 Subsidy for Agro Machinery 24
• 2.9 Insurance for Dairy Cattle 25
• 2.10 Control over Import of Dairy Animal Products 26
• 2.11 Raw Milk Standard 27

3. Analysis of Major Technologies of Dairy Farming Industry 33

• 3.1 Embryo Bioengineering Technology 33
• 3.2 DHI Performance Test 37

4. Analysis of Supply of Dairy Cattle Farming Industry 39

• 4.1 Dairy Cattle Inventory 39
  • 4.1.1 Dairy Cattle Breeds 39
  • 4.1.2 Dairy Cattle Inventory 39
• 4.2 Milk Production 42
  • 4.2.1 Gross Raw Milk Production 42
  • 4.2.2 Raw Milk Production Layout of Various Places and Cow Yield 42
• 4.3 Dairy Cattle Introduction 45
  • 4.3.1 Live Cattle 45
  • 4.3.2 Frozen Semen 46
  • 4.3.3 Embryos 47

5. Analysis of Demand of Dairy Cattle Farming Industry 49

• 5.1 Disparity in Dairy Consumption between Chinese Residents and Other Countries 49
• 5.2 Analysis of Demand for Food Nutrition of Chinese Residents 50

6. Analysis of Marketing Environment of Dairy Cattle Farming Industry 53

• 6.1 Trading Market of Dairy Cattle and Germ Plasm 53
  • 6.1.1 Importation Procedure and Supervision over Import of Dairy Cattle and Germ Plasm 53
  • 6.1.2 Major Suppliers of Dairy Cattle and Its Germ Plasm 54
  • 6.1.3 Pricing Mechanism of Dairy Cattle and Germ Plasm in China 57
• 6.2 Raw Milk Trading Market in China 61
  • 6.2.1 Raw Milk Pricing Mechanism 61
  • 6.2.2 Composition of Raw Milk Price 61
  • 6.2.3 Roles of Raw Milk Procurement Stations (milk stations) in Raw Milk Pricing 62
  • 6.2.4 Impact from Government on Raw Milk Price 63

7. Analysis of Dairy Cattle Related Industries in China 65

• 7.1 Feed 65
• 7.2 Milking and Relevant Equipment 67
  • 7.2.1 Milking Equipment 67
  • 7.2.2 Cooling Tanks 68
• 7.3 Vaccines 69

8. Analysis of Cost-Benefit of Dairy Farms of Different Scales 70

• 8.1 Dairy Cattle Farming Scales 70
• 8.2 Smallholder Farming 72
• 8.3 Scaled Farms 76
• 8.4 Efficiency of Some Scaled Dairy Cattle Farms in Raw Milk Producing Regions after Melamine Incident 89
• 8.5. Analysis of Cost-Benefit of Different Farming Scales 94

9. SWOT Analysis of Different Farming Scales 97

• 9.1 Smallholder Farms 97
• 9.2 Farming Zones 98
• 9.3 Dairy Farmers' Cooperatives 99
• 9.4 Milk Unions 99
• 9.5 Farms Owned by Dairy Processing Companies 101
• 9.6 Trend of Dairy Cattle Farming Modes 102

10. Analysis of Epidemic Environment of Dairy Cattle Farming Industry 103

• 10.1 Epidemic Categories 103
• 10.2 Regional Layout of Dairy Cattle Epidemics 103
• 10.3 Epidemic Control and Dairy Cattle Insurance Policy 105
  • 10.3.1 Prevention of Dairy Cattle Disease 105
  • 10.3.2 Policy Insurance 105

11. Analysis of Impacts from Melamine Incident and Financial Crisis to Dairy Cattle Farming Industry in China 124

• 11.1 Impact on Dairy Cattle Price and Raw Milk Price Trend 124
• 11.2 Short-term Decline of Dairy Cattle Inventory 125
• 11.3 Accelerated Elimination of Low-yield Dairy Cattle and Improvement of Yield 125
• 11.4 Heightening of Threshold to Dairy Cattle Farming Industry 126
  • 11.4.1 Prerequisite for Establishment of Dairy Farms and Farming Zones 126
  • 11.4.2 Prerequisite for Opening Raw Fresh Milk Procurement Stations (milk stations) 126
• 11.5 Pacing up Transition from Extensive to Scaled, Intensive and Quality Efficiency Farming 127
• 11.6 Slowing down of Development of Dairy Cattle Farming Industry to Become Normal 127
• 11.7 Standardization of Supervision over Raw Milk Market 128
• 11.8 Raw Milk Quality Standard Gradually Links up with International Norms with Accelerated Improvement 128

12. Analysis of Investment Opportunities of Dairy cattle farming industry 130

• 12.1 Market Demand 131
  • 12.1.1 Feed 131
  • 12.1.2 Live Animals 131
  • 12.1.3 Frozen Semen and Embryos 131
  • 12.1.4 Vaccines 132
• 12.2 Milking Equipment 132
• 12.3 Farm Management Software System 132
• 12.4 Testing Facilities of Raw Milk 132
• 12.5 Training of Human Resources 133

Figures & Tables

• Figure 1.1 Trend of Cow Yield, 1999-2008 6
• Figure 1-2 Liquid Milk Production and Changing Trend, 2000-2008 7
• Figure 1-3 Liquid Milk Production and Changing Trend, by Month, 2000-2008 7
• Figure 1-4 Changing Trend of Production of Solid Dairy Products, 1997-2008 8
• Figure 1-5 Changing Trend of Production of Solid Dairy Products, by Month, 2006-2008 8
• Figure 4-1 Growing Trend of Dairy Cattle Inventory, 1997-2008 40
• Figure 4-2 Dairy Cattle Inventory Layout, 2008 41
• Figure 8-2 Structure of Dairy Cattle Farming Scales, by Inventory, 2007 72
• Figure 8-2 Proportion of Feed Cost in Raw Milk Price of Different Farming Scales, 2004-2007 95
• Figure 11-1 Raw Milk Price Trend after Melamine Incident 125

• Table 1-1 Per Capita Dairy Possession Volume and Forecast, 1992-2008 9
• Table 1-2 Dairy Imports, 2007-2008 10
• Table 1-3 Structural Change of Dairy Import, by Quantity, 2007-2008 10
• Table 1-4 Dairy Export, 2008 10
• Table 1-5 Imports of Cattle, Frozen Semen and Embryos 11
• Table 1-6 Status of Dairy Farming in National Economy, 2000-2008 11
• Table 1-7 Status of China' s Dairy Farming Industry in the World, 2000-2008 12
• Table 2-1 Physical and Chemical Indices 28
• Table 2-2 Bacteria Indices 1-Total Bacteria Count (TBC) in 1 mg 28
• Table 2-3 Bacteria indices 2- methylene blue decolorization time 29
• Table 2-4 Sensual Indices 29
• Table 2-5 Physical and Chemical Indices 29
• Table 2-6 Microorganism Indices 29
• Table 2-7 Sensual Indices 31
• Table 2-8 Physical and Chemical Indices 31
• Table 2-9 Somatic Cell Count (SCC) 31
• Table 2-10 Microorganism index 32
• Table 3-1 Breeding Bull Breeds of Main Breeding Companies in China and Inventory, 2008 34
• Table 3-2 Major Indices of Production Performance of DHI Tested Farms in Key Provinces, 2008 37
• Table 3-3 Production Performance of Different Inventory of DHI Tested Farms in Key Provinces, 2008 38
• Table 4-1 Dairy Cattle Inventory by Province, 2008 40
• Table 4-2 Gross Raw Milk Production, Cow Milk Production and Growth, 1996-2008 42
• Table 4-3 Milk Production and Average Cow Yield of Different Provinces, 2008 43
• Table 4-4 Top 10 Provinces in Cow Milk Production in 2008 44
• Table 4-5 Top 10 Cities in Cow Milk Production in 2008 44
• Table 4-6 City at Prefecture Level with Cow Milk Production Over 500,000 Tons in 2008 44
• Table 4-7 Origins of Introduction of Cattle for Breed Improvement (H.S.01021000), 2006-2008 45
• Table 4-8 Destinations of Introduction of Cattle for Breed Improvement, 2006-2008 46
• Table 4-9 Origins of Frozen Bull Semen Import (H.S.05111000), 2006-2008 46
• Table 4-10 Importing Regions of Frozen Bull Semen, 2006-2008 47
• Table 4-11 Origins of Cattle Embryo Import (HS05119920), 2006-2008 48
• Table 4-12 Importing Provinces of Cattle Embryos, 2006-2008 48
• Table 5-1 Comparison of Consumption of Liquid Milk and Dairy Products between China and Some Asian Countries, 2008 49
• Table 5-2 Comparison of Growth of GDP, Growth of Per Capita Disposable Income and Dairy Consumption of Urban Resident, 2002-2008 51
• Table 6-1 Extension Scale of Well-bred Frozen Semen by Major Domestic Breeding Companies, 2008 55
• Table 6-2 Proportion of Top 10 Companies in Frozen Semen Extension in National Total, 2008 56
• Table 6-3 Foreign-funded Breeding Agencies in China 57
• Table 6-4 Price of Holstein Dairy Cattle, 2008 58
• Table 6-5 Price of Frozen Bull Semen of Beijing Dairy Cattle Center 58
• (valid from August 1st, 2008 to December 31st, 2008) 58
• Table 6-6 Price of Gender-control Separated Semen and Imported Frozen Bull Semen of Beijing Dairy Cattle Center 59
• Table 6-7 Price of Holstein Embryos of Beijing Dairy Cattle Center, 2006 60
• Table 7-1 Average Demand for Feed of Different Stages of Dairy Cattle in A year (kg) 65
• Table 7-2 Imports of Forage Grass Seeds, 2006-2008 66
• Table 8-1 Changes of Dairy Cattle Farming Scales, 2002-2007 71
• Table 8-2 Changes of Dairy Cattle Production Cost and Benefit under Smallholder (1) Farming Mode, 2001-2007 73
• Table 8-3 Comparison between Cost and Benefit of Smallholder Farming in Some Key Raw Milk Producing Regions, 2007 74
• Table 8-4 Changes of Cost and Benefit of Scaled Farming, 2001-2003 77
• Table 8-5 Changes of Cost and Benefit of Small-scale Farming, 2004-2007 79
• Table 8-6 Comparison between Cost and Benefit of Small-scale Farming in Some Key Raw Milk Producing Regions, 2007 81
• Table 8-7 Changes of Cost and Benefit of Medium-scale Farming, 2004-2007 83
• Table 8-8 Comparison between Cost and Benefit of Medium-scale Farming in Some Key Raw Milk Producing Regions, 2007 84
• Table 8-9 Changes of Cost and Benefit of Large-scale Farming, 2004-2007 86
• Table 8-10 Comparison between Cost and Benefit of Large-scale Farming in Some Key Raw Milk Producing Regions, 2007 87
• Table 8-11 Cost-benefit of Some Scaled Dairy Cattle Farms in Raw Milk Producing Regions after Melamine Incident 90
• Table 8-12 Changes of Feed Cost for Per KG Raw Milk and Raw Milk Price of Different Farming Scales, 2004-2007 94
• Table 8-13 Comparison of Gross Profit Rate, Cost Profit Rate and Sales Profit Rate of Different Farming Scales, 2004-2007 95
• Table 8-14 Unit Cost of Dairy Cattle Production of Different Farming Scales in Heilongjiang, 2003-2007 95
• Table 10-1 Epidemics, Prevention and Control of Some Dairy Farming Regions 103
• Annex: Supply and Demand Balance of Raw Milk Market 134

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