October 31, 2003



China To Import 100,000 Cows From Canada or Australia

China's Inner Mongolia province plans to import about 100,000 dairy cows from Canada or Australia, which is worth at least $100 million. This act is to boost the quality and size of its herd and help local dairies meet rising demand for milk products.


Planning officials in Inner Mongolia's Baotou County, about 580 kilometers (360 miles) west of Beijing, are in talks with trading companies over what would be China's single largest livestock order, said Zheng Wenjing, vice director of the county government's Development and Reform Commission.


"We want to upgrade the quality of our milk production, and we can get better terms for the farmers in our county if we look for a longer-term supply arrangement," Zheng said in an interview in Baotou. "Dairy and steel are our two largest industries, so we need to do whatever we can to help them grow."


China's domestic dairies want to boost their herds to take advantage of rising demand for milk and new products such as flavored yogurt drinks. Dairies may need to import more cows from Australia and Canada as economic growth, which reached 9.1% in the third quarter, raises incomes and boosts sales of milk-based products.


Australia, the world's biggest exporter of sheep and cattle, ships about A$1 billion ($689 million) worth of live animals a year to other countries.


Growing Market


"Live dairy cattle to China has been a growing market for us," said Kevin Shiell, chief executive of exporter-funded Australian Livestock Export Corp. "I understand there have been some high-level talks between Chinese and Australian officials."


China imported 25,987 live cows from Australia in the first nine months of this year. It imported 9,372 in 2002 and 1,985 in 2001, Shiell said.


The local Baotou government would sell the cattle to farmers who supply fresh milk to Inner Mongolia Yili Industrial Group Co., China's second-largest producer of milk, yogurt and other dairy products. Also, it would sell to Inner Mongolia Mengniu Dairy Co., China's fourth largest producer of dairy products. Both companies are based in Baotou.


The China government hopes to clinch the order as soon as possible next year. This would help increase the number of cattle producing milk in Baotou to about 300,000, said An Sihu, director of the commission's planning department.


As consumer demand for dairy products rises along with workers' incomes, China's producers are looking for ways to fund expansion plans.


Mengniu Dairy hired BNP Paribas SA and Morgan Stanley to sell about $200 million of shares in an initial public offering in Hong Kong, bankers involved in the sale said in August.


Mengniu, which distributes milk products, ice-cream and milk powder, may sell 25% of itself to overseas investors in the middle of next year to fund expansion, the bankers said.


"The dairy market in China will be a resilient sector and no one doubts it will grow," Benjamin Lo, an analyst at J.P. Morgan Chase & Co. said.

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