More dairy cooperatives will guarantee milk safety: experts

Experts and government officials have called for the further development of dairy farmers' cooperatives in China to ensure the safety of dairy products and protect farmers'interests.

Establishing dairy farmers'cooperatives can facilitate tracing dairy products and improving their quality, Zheng Xinli, vice-chairman of the China Center for International Economic Exchanges, said at a seminar in Beijing on Wednesday.

Zheng, who is also the former deputy director of the Policy Research Office of the Communist Party of China Central Committee, said the country’s dairy industry can learn from its counterparts in the Netherlands, where farmers are shareholders in agricultural cooperatives.

"We need to reflect on why farmers are showing such indifference to the quality of their products. Why not establish an interest mechanism so that they will pay more attention to product quality?" he said.

Zheng said that currently, farmers and agricultural companies are market rivals. "If companies offer low prices during the milk collection process, farmers will suffer losses and vice versa," he said.

China’s dairy industry was hit hard after a scandal in 2008 in which dairy farmers were found to have added melamine to raw milk to make it appear to have a higher protein content. The incident left at least 300,000 babies sickened and six dead.

Zheng said a cooperative can link the interests of farmers and agricultural enterprises. "Farmers can become shareholders of agricultural enterprises through cooperatives, and they could also gain profits through dividends of companies'profits," he said.

China had more than 12,300 dairy farmers'cooperatives as of 2010, the latest figure available, said Ma Ying, deputy director of the dairy industry management office of the Ministry of Agriculture.

"The figure is almost twice that of 2009, which shows that the development of dairy cooperatives have been robust," she said.

But she warned that authorities should make sure that cooperatives truly represent the interest of farmers.

Establishing cooperatives is also key to protecting the financial interests of dairy farmers, who have long suffered from low profit margins due to the rising cost of forage crops.

The price of raw milk has stayed stable from 2011 to June 2013 while the price of forage crops have increased 22 percent during the same period, the Ministry of Agriculture said.

As a result, the country encountered a severe shortage of raw milk last year, with raw milk production, which was 35.31 million metric tons in 2013, declining 5.7 percent from the previous year.

The shortage, coupled with a ban of imports of whey protein powder and whey protein concentrate produced by Fonterra in New Zealand after a contamination scare, has also resulted in a price spike in raw milk, which increased from an average of 3.2 yuan (53 cents) per kg to an average of 4.2 yuan nationwide.

Ma, from the dairy industry management office, said even though the price surge has benefited farmers, the increasing prices have failed to cover the cost increases.

Bi Yu’an, an inspector with the food safety supervision department of China Food and Drug Administration, said, "When the country resumes imports of raw powder products from New Zealand, the dairy farmers will suffer losses again as foreign products are much cheaper."

Bi said a plan for cooperatives that makes farmers shareholders of dairy companies is the best way to protect farmers from price fluctuations.

However, Atze Schaap, director of dairy development in China at Royal FrieslandCampina, a Dutch dairy cooperative, said the success of cooperatives is also tied to the market success of dairy enterprises.

"A cooperative is not a guarantee for success. The cooperative must own a successful company, not the other way around," he said.