1. 1
Milk, Cows and Chopsticks
A Value Chain Approach on
the Development of the Chinese Dairy Sector
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Giacomo Mencari
Academic Year 2007 - 2008
2. 2
Outline
1. Research asset
2. Focal Point of the Study
3. Approach and Methodology
4. Limits of the study
5. Results
6. Conclusion and Suggestions
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3. 3
Outline
1. Research asset
2. Focal Point of the Study
3. Approach and Methodology
4. Limits of the study
5. Results
6. Conclusion and Suggestions
1. Research Asset
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4. 4
Relevance of Dairy in China
• Chinese people traditionally did
not include dairy in their diet
• Food habits changed with
economical boom, urbanization
and westernization of styles of life
• China is the first largest dairy
importing country in the world
• China rose in the world production
rank
• Dairy sector in China is expected
to develop as fast as consumption
will increase (FAPRI projections)
• Dairy development (consumption
and production) is considerated a
strategic sector from the central
governement
2005 Mt 2006 Mt
Increment
rate
1 India 88 India 91 3,4%
2 USA 80 USA 83 3%
3 Russia 31 China >30 >7,1 %
4 Pakistan 29 Russia >30 -
5 Germany 28 Pakistan >29 -
6 China 28 Germany 28 -
7 France 25 Brazil 25 4,1%
8 Brazil 24 France 24 -4%
9 N. Zealand 15 N. Zealand 15 -
10 Ukraine 14 Ukraine 14 -
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
ThousandMetricTonsME
0
5.000
10.000
15.000
20.000
25.000
thousandhead
Cow Milk Production
Dairy Consumption (fluid and manufacture)
Milk Cow Numbers
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5. 5
The Dairy Sector in China
• Dairy production is not
distributed homogenous in
the territory
• A multitude of small farms
beside few big farms
managed on large scale
• 80% of the total amount of
the milk produced by small
dairy farms in China
• Landless production systems
located in peri-urban areas
cover important role in the
national production
Milk Deficit > 400 tonnes Milk Deficit < 400 tonnes
Milk Surplus Cows in stocks of national total
Source: Rabobank International Report (Lou 2006)
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6. 6
Outline
1. Research asset
2. Focal Point of the Study
3. Approach and Methodology
4. Limits of the study
5. Results
6. Conclusion and Suggestions
2. Focal Point of the Study
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8. 8
Objectives
1. Description of the dairy value chain in China
2. Comparison between two different production
areas
3. Analysis of interrelations between actors
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9. 9
Outline
1. Research asset
2. Focal Point of the Study
3. Methodology
4. Limits of the study
5. Results
6. Conclusion and Suggestions
3. Approach and Methodology
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10. 10
What means Value Chain Approach in
development studies?
Kaplinsky and Morris definition: a Value Chain is the full range
of activities necessary to bring a product from its production to
its end use, including marketing, processing, distribution and
other support functions necessary to bring the product to its
end-user.
VC is based on a characterization of input-output relationships
from producers to retailer, and the coordinating mechanisms
that guide activities at each step.
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11. 11
activities
Assistance for
IA
Feeding Collecting
Raw Milk
Buying and
selling
Storing Buying and
consume
Supply of
feeding
Milking Hiring
transport
Buying and
selling
Sanitary
assistance
Cows
management
Storage
Extension
service
First storage Processing
dairy outputs
Consulting First sanitary
assistance
Labelling
Negotiate
price
Marketing
actors
Facotries of
concentrates
farmers Drivers Managers Managers
Farmers Workers Workers Workers
Veterinary Dairy
Companies
Universities
Credit
Insitutions
ConsumptionRetailersTransportProductionInputs Processing
Mapping Actors and Activities
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Methodology
1. Random selection of the stakeholders
2. Observations on the dairy farms
3. Semi-structured interviews with farmers,
processing companies managers and other
stakeholders
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Outline
1. Research asset
2. Focal Point of the Study
3. Approach and Methodology
4. Limits of the study
5. Results
6. Conclusion and Suggestions
4. Limits of the Study
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Limits of the study
• Limited number of interviews (10)
• Incomplete stakeholder analysis: only
farmers and processing
• Translation difficulties
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Outline
1. Research asset
2. Focal Point of the Study
3. Approach and Methodology
4. Limits of the study
5. Results
6. Conclusion and Suggestions
5. Results
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Dairy Value Chain in China
• Dairy production is supported and regulated directly by the central
government
– Set up activity support
– Fodder costs subsidies
– Management of AI
• Dairy production is gaining importance in peri-urban areas driven by
demand
– Inputs need to be imported
– Environmental problems
• Several forms of farmers cooperation
– Dairy gardens
– Milking Halls
• Poor management and lack of dairying culture
– Animal feeding
– Hygiene
– Herd management
Production
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Dairy Value Chain in China
• Few big (national) companies control
major part of the market
– Very small portion of the dairy products are
sold on informal markets
• Expectation for further developments are
related rather with new consumers than
with new manufactured products
– New urban immigrants
– Young generations
Processing
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Beijing
• Large dairy operations
mostly former state farms
nowadays private owned
or controlled operations
• Modern technologies
available
• Manure disposal
Jiangsu Province
• Small dairy operations
family owned
• Rudimental structures
• Environmental problems
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20. 20
Analysis of Interrelations Between Actors
Large Dairy Operations
• Good negotiation power
or even direct integration
Smallholders' farms
• Lack of negotiation power
• Dependence from inputs
and services from the
dairy companies
• Preference to get raw
milk from large dairy
operation
– Simplification of suppliers
– Better product quality
• Milk price at farmgate is
linked with quality
parameters
• Supply inputs (feed, AI,
tech. assistance)
Production Processing
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Outline
1. Research asset
2. Focal Point of the Study
3. Approach and Methodology
4. Limits of the study
5. Results
6. Conclusion6. Conclusions and Suggestions
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Conclusions
• Positive trends for dairy sector
– In certain areas small dairy farmers continue to play
an important role
– In other areas large operations dominate
Suggestions
• Conditions to remain competitive
– Improve technical knowledge and management
– Decrease the dependence on external markets for the
fodder
• Improve the competitiveness of small dairy farms
– Develop and expand cooperation systems
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