India Says ‘No’ to Chinese Dairy Products [ Transfreez Mobile Refrigeration - India's Most Effective Refrigeated Trucks ]

The strong message comes as China’s steps to improve product safety and regain consumer confidence are slow to materialize.

By Fran Howard, Agweb contributing writer

The world’s second most populous country and its largest producer of milk gave China a strong message by reiterating that it would not import any of its milk-based food products.

India reaffirmed its ban on Chinese milk and dairy products recently, extending the sanction through June 22, 2015, according to USDA’s Foreign Agricultural Service (FAS). Banned products include chocolates, chocolate products, candies, and other foods made with milk or milk solids.

"India’s ban on Chinese milk and dairy products has been in place since 2008," says Sara Dorland, analsyst with the Daily Dairy Report and managing partner at Ceres Dairy Risk Management, Seattle. The ban went into effect shortly after China’s dairy industry suffered a scandal related to milk tainted with melamine, which killed four children and sickened thousands of others.

"Since then China has been taking steps to improve product safety and regain consumer confidence, but the road to recovery for China’s dairy industry has been peppered with setbacks and has been slow to materialize," says Dorland. "Measures taken since 2013, however, appear to be giant strides toward repairing some of the country’s food-safety problems."

Second only to China, India has an estimated population of more than 1.26 billion people as well as a growing economy.

"India’s consumer class is expanding, and dairy consumption is growing around 5 percent per year, and India needs to keep pace with this growth," says Dorland. "India’s dairy industry is still primarily a subsistence pastoral system, which means it is affected by adverse weather conditions. When India falls behind in domestic production, the country will import dairy products."

As the world’s largest producer of milk—at least when buffalo milk is included—the country is expected to produce 140.6 million tons of milk this year, accounting for roughly 17 percent of the world’s total milk supply. In 1990-91, the country produced 53.9 million pounds, according to FAS.

"India’s ban is likely political in nature rather than substantive as the country has not imported dairy solids of consequence from any nation since 2012," says Dorland. FAS projects that India will not import any nonfat dry milk, fluid milk, or butterfat this year.

Like China, India is trying to grow its dairy industry. The Indian government recently launched dairy development programs and is strengthening the infrastructure.

India’s National Dairy Plan, approved in February 2012, is expected to inject $416 million into the industry through 2017 to meet the need for an expected 150 million tons of domestic milk production. Initiatives under India’s National Dairy Plan include increasing productivity through scientific breeding and nutrition and strengthening village-based milk procurement systems, according to FAS.

"Despite India importing very little dairy, India does import other products from China," notes Dorland. In 2012, India imported $66.57 billion in products from China, according to the Brookings Institute.

"There is a chance that without the ban, dairy product from China could come in," she adds. "But India, as the world’s largest producer of milk, has a vested interest protecting its industry."

Indian dairy sector set for overhaul; to move from processors to producers [ Transfreez Mobile Refrigeration - India's Most Effective Cold Plate Refrigerated Trucks ]

India has the maximum number of cows and buffalos in dairy production: about 300 million. It is also the global leader in milk production: about 135 million tonnes a year. Neither figure impresses Trevor Tomkins of the US-based Venture Dairy, an early-stage impact investing firm focused on dairying in developing countries.


"India produces that quantity of milk from far too many cows," he says. The efficiency of the Indian dairying sector is abysmally low. The best- run farms in the world produce 1.6 kg of milk for every kg of feed, explains Tomkins; in India it's less than a kg.

In India, dairying is predominantly unorganised and the sector is dependent on rural households for supplies; over 70 million of 147 million households in India depend on dairy for their livelihood. They have been largely left to their devices and they continue to milk animals that produce around 3 litres a day.

"This can be easily taken to 15 litres with better nutrition and farm management," says Tomkins. "It's not rocket science."

Why then hasn't this happened? The companies and cooperatives that anchor the dairy sector are content presiding over primitive milk-collection systems. It's just a milk mop-up model that is at work. "The farmlevel contribution of NDDB (National Dairy Development Board) is little," explains GNS Reddy, founder of Akshayakalpa, which is setting up a hub-and-spoke dairy cluster of 300 organic dairy farms in Karnataka.

And why didn't they focus on the upstream of the value chain? "Because the milk processors have done very well for themselves and just don't find the need to invest time and money in small-holders," explains Tomkins.

Also, the Indian dairy sector is highly fragmented, with organised players having only about 18% of the market, which contributes to the disarray at the farmer's end.

Producer Focus

The processors are just about coping with the increasing demand for milk. According to Ladderup, a financial advisory, the Indian dairy sector generated revenue of $55 billion in 2012 and is expected to reach $118 billion by 2017. Amul (Gujarat Cooperative Milk Marketing Federation) has had a good run in recent years. It recorded a turnover of `18,000 crore in 2013-14, a 32% growth over the previous year.

Western markets are saturated and the action is evidently moving to emerging economies, which are at the threshold of a huge spurt in milk demand. Tetra Pak projects a 30% growth in dairy consumption in developing countries over the next decade and is banking on the 2.7 billion low-income consumer pool as the global dairy industry's next big opportunity.

This is the reason why Tomkins has been traveling across India, China, and parts of Latin America and east Africa over the past year since he formed Venture Dairy. The potential is huge, but it requires a radical systemic change in the way business is organised and conducted.

He would like to chaperone Indian dairying from a "subsistence" type of activity to robust commercial models. "Dairying families and communities have to be made profitable and productive economic units," says Tomkins. "Only then can they transition from 25 to 100 cows to maybe 500 cows."

He believes dairying can be sustainable only if food systems are integrated with a deeper understanding and engagement on nutrition and feeding. "Farms that don't produce a large proportion of their feed are simply not sustainable" he explains. Tomkins, who is impressed with the Akshayakalpa model, visited the project site recently for a possible second round of funding. "We have to produce milk where it is consumed," says GNS Reddy of Akshayakalpa, who is passionate about environmental and sustainability issues, like Tomkins.

A local, decentralised, community-focused approach would be ideal for a country like India with millions of small-holder farmers. Tomkins, with nearly four decades in dairying, has seen it all in the US and elsewhere, and doesn't approve of the CAFO (concentrated animal feeding operations) or the 'factory farm' way of dairying, in which thousands of animals, pumped with antibiotics and hormones, are subject to lifelong, indoor confinement in a single location. However, the first CAFOs are already beginning to appear in India.