October 9, 2007

 

China offers subsidies to dairy industry to sustain producer interest

 

 

China's top economic planner has urged local governments to implement new measures to support dairy farmers by the end of the year.

 

The new measures were to promote the development of the dairy industry, as one in three diary farmers suffered losses in the previous year, The People's Daily reported, citing officials from the National Development and Reform Commission (NDRC).

 

Last month, measures such as increased subsidies for dairy herds were announced to promote the dairy industry. The measures come in the wake of narrow profit margins in the industry, which have forced farmers to slaughter dairy cows for meat.

 

The cost of dairy herd raising in China has increased sharply in the past year as feed costs soared 30 percent while worker salaries doubled.

 

Increases in expenses for quarantine, transport and water and power added to the industry's woes.

 

Sale prices of milk, which has flatlined, was the final straw.

 

Only one third of the country's dairy producers were reportedly making profits while another third were suffering losses.

 

Fan Xueshan, director of the Beijing Creamery Association said Chinese dairy enterprises were unwilling to raise prices they pay to farmers in the fiercely competitive market.

 

Analysts commented that the NRDC is introducing these measures to prevent a steep drop in milk cows which would result in a cow shortage in the near future.

 

China is already suffering a pork shortage mainly due to losses incurred by farmers amidst high feed prices and pig diseases. The shortage led to a near 80 percent  increase in pork prices over the past year, stoking inflation fears. The Ministry of Commerce had recently announced the ninth consecutive week of pork price decline as more piglets were reared in May and June to deal with the shortage.

 

While such measures can be implemented for pigs, cows are a different matter.

Milk cows have the longest breeding cycle in the livestock sector and China's cow herds would find it even more difficult to recover should a shortage occur, said Agriculture Minister Sun Zhengcai last month.

 

NRDC's measures will put all raisers of progenitive cows across the country under the subsidy programme that previously only covered 181 counties.

 

The government would also provide subsidies for insurance and extend loan repayment periods to farmers, on top of other subsidies announced.

 

With a breakneck development of the dairy sector in the past few years, China has become the world's third largest dairy producer after India and the US, with an output of 33.02 million tonnes of dairy products in 2006.

 

China's per capita consumption of dairy products of 25.1 kilogrammes was four times below the world average and 12 times below that for developed countries.