China invests in dairy herd; impacts for beef could follow

May 4, 2012

China has decided it wants to improve its dairy herd and expand its production. And when China decides to do something, it does it big. When China does something big, it can have a huge effect on the world.

An estimated 100,000 head of dairy heifers will trek across globe to new homes in China this year. These heifers will follow the roughly 250,000 who already made the trip since 2009.

China Modern Dairy, China’s largest dairy company in terms of head count and milk production, aims at milking 300,000 head by 2015. China Modern Dairy is just one of the companies in the rapidly growing Chinese dairy industry. And where there is a large dairy industry, there is a ready supply of cull steers which has the potential to affect China’s demand for imported beef.

Typically, one would expect greater domestic availability of beef to result in a drop in beef import demands. However, Joe Schuele, communication director of the U.S. Meat Export Federation warned against looking at the situation as that simple.

Schuele explained that dairy beef is generally lower quality. A greater availability of lower quality beef would likely have the effect of making beef an inexpensive protein choice for Chinese consumers. If cheap— but low quality—beef were to become more of a norm in the Chinese diet, demand for higher quality, imported beef could actually rise, despite the increased domestic beef availability.

In February 2012 (most recent data), China/Hong Kong imported 3,600 metric tons of beef and variety meats, valued at $20.5 million, from the U.S. Though relatively small, especially considering the vast population, Chinese demand for beef is slowly growing.

According to a Kansas State University report, beef represented 2 percent of the average Chinese consumer’s meat diet in 1980. By 2008, that percentage had grown to 8.

The average per capita income for Chinese consumers has increased significantly over the last 20 years and it is expected to continue its rise. Trends in other countries with similar conditions suggest that meat will increase in the overall consumer’s diet. Even if beef remains only at 8 percent of Chinese meat consumption, an increase in meat consumption will make that 8 percent larger. Multiplied over the large population of China, even slight increases can have a big impact.

American valuables

The Holstein dairy heifers flooding into China come from dairies in Australia, New Zealand and Uruguay and are to be the seedstock of the future of the Chinese dairy industry. U.S. cows—despite their more than doubled milk production abilities compared to Chinese dairy cows—are not being imported. China banned all live cattle importing from the U.S. following the discovery of BSE in the U.S. in 2003.

Though China has not tapped the U.S. in its hugescale collection of dairy heifers, importation of U.S. genetics, engineering designs, and management strategies is central to China’s effort to reduce its dependency on dairy imports and feed its growing population.

The average Holstein dairy cow in the U.S. produces 9 tons of milk a year.

Her average Chinese counterpart produces only 4 tons a year. This vast difference in production levels reflects the less than scientifically rigorous breeding practices in China over the years. This new wave of Chinese dairymen hopes to change that and improve the country’s genetic stock. The imported heifers are reportedly being only impregnated with semen from American Holstein bulls.

China’s new dairies are similarly based on U.S. designs and management practices. The large-scale free-stall dairies found mostly in western states are being duplicated en masse. As of June 2011, the China Modern Dairy company had 17 such facilities scattered across central and eastern China with plans to build many more in the coming years. Each dairy has been built to accommodate 10,000 head of cattle when at full capacity. — Kerry Halladay, WLJ Editor