China dairy impresses Dutch farmers
While the Netherlands is an international leader in dairy farming and production, Dutch dairy farmers were nevertheless bowled over when they visited China. Together with a group of 45 other Rabobank customers, dairy farmer Warner van der Leeuw from the village of Nij Beets in the north of the Netherlands visited several Chinese dairy companies: 'The speed with which they are professionalising their industry is breath-taking.'
Quality and image are key in the world of dairy
The local Rabobank Heerenveen-Zuidoost Friesland organised a study tour for dairy farmers to North East China. On their journey, the group stopped at the Sino-Dutch Dairy Development Centre, an organisation whose members – including China Agricultural University, Wageningen University, livestock improvement company CRV, Rabobank and dairy company FrieslandCampina – work on improving production, safety and quality standards in the Chinese dairy supply chain. Rabobank supports this initiative through its food and agri knowledge and network: training, providing funding for research projects, and organising field trips for Dutch clients to China, and vice versa. The bank also provides financial support for the modernisation of dairy farms in China.
Warner van der Leeuw, a 35-year-old Dutch dairy farmer who owns around 100 dairy cows and young cattle, was one of the participants in the study tour. 'Although China wouldn't necessarily be at the top of my list of countries to visit, I think it's all really fascinating from a professional point of view', he explains his reason for taking part in the trip. 'Chinese consumption of dairy products has been booming in recent years, which makes it an important market for companies such as FrieslandCampina, to which I supply milk. At the same time, Chinese dairy producers have also made a lot of changes to their production processes for the domestic market, specifically after a number of Chinese babies died in 2008 as a result of the melamine scandal. I wanted to see all those major changes in production with my own eyes.'
One of the world’s biggest dairy markets
Data compiled by Rabobank Food & Agribusiness Research shows that China is one of the world’s biggest dairy markets. Its population of 1.4 billion currently consumes a total of 45 billion litres of dairy annually. Three-quarters of this quantity is produced by domestic farmers, as the country is home to nearly 2 million dairy farms. Yet the country imports more than 10 billion litres of dairy from abroad, with the Netherlands being one of the largest suppliers of, in particular, infant and children’s nutrition.
'I would expect China to always remain a key market for Dutch dairy farmers, not least because of the high quality of our products and the image of grazing cows in the pasture.'
While the Netherlands may be regarded as an international leader in dairy farming and dairy production, the Dutch dairy farmers who took part in the study tour were nevertheless deeply impressed by what they saw in China. Van der Leeuw: 'The Chinese have been investing heavily in their domestic dairy industry. Farmers looking to supply to a dairy production facility must meet strict requirements. We visited projects where farmers had pooled their resources to form larger companies, and these are all professionally run', he recalls. 'We also noticed that the sector is essentially skipping an entire step in the process, at least when you compare the transformation they’re undergoing to how the sector evolved in the Netherlands. It's like they are fast-forwarding from the 1950s straight to 2015, with no stage in between. They are building farms with huge numbers of cattle, ranging from 1,000 all the way up to 40,000. I have to say I'm impressed with the speed with which they’re professionalising their industry. We didn't just visit dairy farms in China; our tour also took us to a state-of-the-art milk processing plant with technical facilities that would be considered highly advanced even by Dutch standards. This facility also owned many local dairy farms, which gives it greater control over supply and quality standards. In our situation, it works exactly the other way around: here in the Netherlands, we've got individual dairy farmers working with the dairy cooperative FrieslandCampina, which markets the milk to third-party buyers on our behalf.'
Shortage of fertile land
Despite the 'great leap forward' the Chinese dairy industry is making, Warner van der Leeuw expects Chinese demand for imported dairy to remain steady: 'Chinese dairy farmers are grappling with a shortage of fertile land, while at the same time they're losing access to fresh water. That's a major problem, as it could potentially prevent future growth in dairy production. Another factor is that production costs in China are relatively high because a large amount of the fodder is imported from the United States and South America. The situation is quite different here in the Netherlands, as the grass and corn we feed our cows is largely grown in our own country. I would therefore expect China to always remain a key market for Dutch dairy farmers, not least because of the high quality of our products and the image of grazing cows in the pasture. During our visit to China I learned how vital quality and image really are to our industry. We need to make sure to always stay on top when it comes to those two aspects.'
Giving something back
Van der Leeuw was fascinated to witness first-hand just how Rabobank supports local dairy farmers in China. 'They provide training to Chinese students to help them to further modernise operations in the dairy sector. I'm impressed by the efforts Rabobank is making to share its expertise and educate those in the Chinese dairy industry. I think that's another important aspect: as dairy producers, we are not just interested in making maximum profit in a country – we also want to give something back. In fact, that's also what you need to do in China if you want to create goodwill. They may have embraced a system of free enterprise to some extent, but the government always keeps a tight grip on everything. If you're only out to improve your market position and maximise your profits, you'll have to answer to the government at some point. In that sense, it’s still an unpredictable country, and the dairy sector should be careful never to become overly dependent on it.'