The practice of mixing melamine into animal feed to make them appear high in protein is common and is an "open secret" in the industry, according to reports by China's state media.
The reports indicate that the scope of China's latest food safety scandal could extend beyond milk and eggs.
As it is rare for the Chinese media to publicise such a problem, this appears to be a silent admission by China's central government that melamine contamination is widespread.
The news comes after four brands of Chinese eggs were found be melamine-contaminated, which agriculture officials have speculated came from tainted feed given to chickens. The discovery of the contaminated eggs followed closely to a shocking melamine-tainted milk products scandal that killed four infants, hospitalised thousands others, and sent ripples throughout the world.
Health experts said ingesting a small amount of melamine poses no harm, but larger doses can lead to kidney stones and even kidney failure.
Deliberate addition of melamine to food and animal feed is forbidden, but its apparent prevalence highlights the inability of authorities to keep the food production process toxin-free despite official promises to raise safety standards.
Chemical plants used to pay companies to treat and dispose of excess melamine, but have started selling it to manufacturers who repackaged it as "protein powder" since five years ago, said a Nanfang Daily report, which cited an anonymous chemical industry expert.
The inexpensive powder was first used for aquatic feed, but eventually spread to poultry and livestock feed, the report said, adding that the effect far more exceeds the milk powder scandal.
The reputation of Chinese products has come under fire in recent years after they were repeatedly found to contain high levels of chemicals and additives.
The milk scandal had delivered a heavy blow to the Chinese dairy industry, which saw their products banned in several countries and confidence was lost in the domestic market.
Shanghai-based Bright Dairy and Food Co. reported a net loss of US$39.6 million in the third quarter, compared to a profit of US$57 million the same period last year, said Xinhua News Agency.
Two other major dairy companies, Mengniu Dairy Group Co. and Yili Industrial Group Co., saw sales plunge by more than 90 percent after news of the contamination became public, and expected to suffer losses for the year, Xinhua said.