Situation and problems in relationships between dairy enterprises and farmers in Inner-Mongolia, China

Rapid economic development in Inner Mongolia, China is increasing the consumption of livestock products as well as forcing changes in the structure of agricultural production in recent years. In particular, marketing structure and transaction patterns for fresh milk have been changing extensively since the 1990s. Establishment of milk stations provides an opportunity for dairy farmers who do not own a milking parlor to take their dairy cows to a milk station and sell their fresh milk. Recently, dairy production under contracts with corporations such as the Private-Enterprise-Linkage (PEL) are increasing primarily in sub-urban areas. We selected the Inner Mongolia Yili Industrial Group Co. Ltd (Yili) as the subject for our case study. At the same time, we examined cases of small-scale subsistence farmers who play a central role in dairy farming in Inner Mongolia and compared the latter with the former. This study aimed (1) to identify the structural changes of milk production in Inner Mongolia by comparing data from the 1990s to the 2000s, (2) to clarify the interrelation between dairy farmers and milk product manufacturers contracting with farmers, (3) to discuss possible future issues based on food marketing structure and milk production system with farmers. The results showed three future problems for dairy production in Inner Mongolia. First, there is a problem with ensuring a stable supply of quality feed. However, standards for the quality of raw milk set forth by milk product manufacturers improved after the melamine adulteration incident in 2008. Secondly, there is a problem with technical support for feed management. PEL type dairy production has managed to increase the number of cattle raised and milk yields by moving into a pastoral park. This was made possible through technical support from dairy enterprises. Thirdly, there are still problems obtaining sufficient financial support to make the necessary improvements. However, Yili has established a payment system to offset feed prices by proceeds from sales of raw milk.