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Dairy industry now safer, but farmers feeling the pinch

Reading Time:5 minutes
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In the first of a two-part series looking back at the milk contamination crisis, Al Guo revisits the dairy farms in Inner Mongolia to see what has changed.

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When Yu Wenqiang drove his milk truck towards Mengniu's factory in Hohhot's Gelinheer county late last month, traffic police stopped him and ordered him to pull over and wait. A few minutes later, a cavalcade of police cars with their lights flashing and mini-vans with the windows tinted black swept past him and drove into the dairy factory.

A traffic policeman told him later that 'a big state leader' was visiting. When Yu switched on the news that evening, he learned the visitor was Xi Jinping, heir apparent to President Hu Jintao. According to the CCTV report, Xi had been impressed by the automated production line he saw during his inspection, but Yu laments the leader didn't get to see the whole picture.

'I wish he had spoken to me. Nobody there would tell him that Mengniu's giant empire is built on the pain and losses of ordinary dairy farmers and milk collectors.'

Yu runs a small milk collection station within 20 kilometres of the Mengniu factory in Inner Mongolia. His surname has been changed and the name of his village withheld to protect his identity. His livelihood has suffered badly since the contamination scare shook the dairy industry to its core last year. Yu fears fundamental changes to the way milk is supplied could put small farmers and collectors out of business.

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Melamine, used in the production of plastics and glue, was found in dairy products from Hebei -based Sanlu group in August last year. A nationwide check found that products from many dairy companies, including Yili and Mengniu, the mainland's largest two, contained excessive amounts of melamine. The chemical was added to boost nitrogen content, allowing it to pass testing for protein levels. Eventually, more than 300,000 children were made ill and at least six died because of the additive. Dairy factories had to destroy tainted products and reserves. The US$20 billion-per-year industry was paralysed in the following months, and losses have been estimated at about 20 billion yuan (HK$22.7 billion).

The share price of Hong Kong-listed Mengniu Dairy plunged 70 per cent on September 24, last year when the stock resumed trading after a four-day suspension. Mainland-listed Yili saw its stock price drop by 50 per cent over 10 consecutive trading days.

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