With a growing population, and growing levels of income the scale of increasing demand for milk on this continent is hard to imagine. While the current land ownership (or lack thereof) in China is an obstacle to expansion, some companies are looking at innovative ways to grow their milk production potential.

One example that we visited on our Nuffield GFP was that of Dairy United (DU) in inner Mongolia. Dairy United was established in 2004, and through a leasing system with local farmers has gradually built up both land base and cow numbers.

Dairy United leases the land farming rights from local farmers (average farm size in China is 1mu, which is equivalent to 0.66 ha, and the land belongs to China, not the individual farmers) and their cows. Throughout the lease agreement, DU retains ownership of the calves born, and by the end of the lease term, they will also own the cows.

Many of the farmers in the lease arrangements are employed as staff on these growing dairy units, while others have opted for off-farm work in the cities. DU currently has 9000 animals (which include young stock) on 13 separate milking units.

Funding

Many of these growing dairy units have been part funded by Yili, one of the two main dairy processors in the area. For example, in some cases Yili may provide the land and buildings, while the dairy farm/business must supply the equipment, stock and labour.

While Yili has a range of products that have grown in value and demand over the years, without a doubt it is fresh milk that is their most valuable product. All milk is sold as UHT milk rather than pasteurised, because of the challenge of ensuring a complete chain of refrigeration up to the point of consumption.

Milk is generally viewed as a “snack” product and so is packed in 250 ml cartons, which retail for anywhere between 30c and 75c per carton, depending on the type of milk, i.e. standard, lactose-free or organic.

Processing plant

The processing plant was a very impressive sight with the most up to date technology and robotics. More than 10 packing lines operate for 24 hours, followed by one hour of cleaning and maintenance, with each line packing up to 20,000 cartons of milk every hour.

When we arrived at the Yili production plan, one of the first things that struck me was the scale of their vision. In the reception area was a model of the whole production plant- this stretches over an area of 30,000 acres and is made up of 7 different production centres, each one the size of a small town in Ireland.

We were given a detailed overview of the "expected" processing capacity of each of these units - "expected", because, as of yet, only three of the seven centres exist. But such is the expected scale of growth of the milk market, that these four centres in this region alone will be complete by 2018.

Challenges

As was my impression from so many of our Chinese visits, the approach seems to be “dream big, plan big and build big”. However looking to the future, the biggest challenges that the Chinese will face in this “big”market will be a shortage of cows and skilled large scale farm managers.