China's dairy industry is on the move if developments in Xingtang County in north China's Hebei Province are anything to go by. Cows used to roam around rural houses there, but now they are being sent to the province's 109 new dairy farms built this year.

The county government has encouraged dairy farmers to set up the large dairy farms of at least 1,000 cows by providing subsidies worth 600,000 yuan (US$88,200) for each farm. As part of the agreement, the farms that get the subsidies must look after the smaller farmers' cows.

One of the farms, Kangyuan Dairy Farm, for example, has 650 cows sent by 48 small farmers.

The farm supplies milk to Sanyuan, the dairy company that took over the bankrupted Sanlu Group which not long ago was China's biggest dairy producer but suffered devastating losses being at the center of the melamine-tainted milk scandal last year.

At least six infants died and over 300,000 others suffered kidney problems and other symptoms after consuming melamine-tainted milk powder.

Melamine was added to milk in the past was to make it seem better than it really was. After melamine scandal, it is impossible to sell poor quality milk.

"We have closed 323 milk stations that collected substandard raw milk from individual farmers," said Lu Shuping, deputy director of the Animal Husbandry Bureau in Xingtang County, one of China's major dairy producing counties.

Cow farmers hope that the new unified breeding system will give them the competitive edge by fundamentally improving the quality of raw milk, said Liu Yingwu, secretary general of the Dairy Association in Shijiazhuang, capital of north China's Hebei Province.

Individual farmers are still responsible for their own herds in the new dairy farms, but the farms have standard management of feedstuff, milking and inoculation.

"I didn't pay fees for joining the Kangyuan Dairy Farm this year, since the farm has received government subsidies. But the farm may charge some fees in the future," said Guo Shuan, a 42-year-old Xingtang dairy farmer.

Guo said he planned to buy more cows, as the milk price had rebounded to the pre-melamine scandal levels in November.

Small farmers benefit from keeping their cows at the big farms, where the cows are healthy and therefore the milk is better quality.

However, the transformation of Xingtang's diary industry is forcing many farmers to quit dairy farming.

If the new dairy farms are not close to the smaller farmers' homes then they may feel it is too time-consuming to commute everyday, said Lu Shuping.

"I used to keep two dairy cows besides doing other kinds of farming. But it is not convenient for us to raise cows in the new farms. I sold them to the big dairy farmers since I don't plan to invest more in dairy cows," said a Xingtang farmer called Zhang Ying.

The melamine crisis brought changes in many ways. It also made survival of small dairy farms difficult.

"I sold two of my eight milk cows after the melamine scandal last year. I did not know what to do with the 250 kg of milk produced every day, as nobody purchased raw milk," said Guo Shuan.

Lu Shuping, an official with Xingtang County Animal Husbandy Bureau, said the number of milking cows in the county has dropped by 25,000 from 97,000 in October 2008, as farmers either killed or sold cows, mainly old ones that produced less milk.

Hebei Province now has 1.6 million milk cows, 70,000 less than the same period last year. But the number of livestock has kept increasing since April.

The Chinese dairy industry is recovering after the melamine scandal, said Wang Yansheng, a Hebei Provincial Dairy Association official. Dairy farmers and producers have learned a hard lesson, which in some ways has helped improve the quality of milk, he said.

China's dairy output amounted to 14.23 million tons in the first three quarters of this year, up 3.42 percent year-on-year.

(Xinhua News Agency December 25, 2009)