However, it was the milk prices in the supermarket that caught my attention as much as the stunning scenery of the island.
There were two choices of pasteurised milk available, one priced at €4 per litre, and the other at €5.50 per litre.
On returning to Beijing where I live, I decided to continue the price comparison in the expectation that better-value offerings would be available.
But the reality is that there is a limited range of dairy available in China at the moment. The cheapest pasteurised milk that I could find was €3.50/l, and many of the cheaper yoghurt product ranges have been discontinued in supermarkets. Dairy has a become a premium product, and as such is becoming a luxury that most Chinese can rarely, if ever, afford.
Chinese dairy companies have re-positioned their brands and markets to aim at high-margin, high-value products, with much less focus on volume. This all happened in the wake of the melamine scandal, when Chinese consumers lost faith in local product, and instead turned to ‘premium’ imported product, regardless of what it cost.
In tandem with this, there has been a rapid consolidation of dairy farming, with large numbers of small farms driven out because they were not able to meet the exacting demands of a newly quality-assurance conscious processing industry.
Cows with sky-high somatic cell counts were suddenly facing the chop, and farmers that resisted the new requirements ended up spilling the bulk of their milk down the drain.
The investment and new skills required have effectively forced many of the smaller farmers to quit, selling out or handing over management of their farms to groups such as Zhong Ding Farming Group, which now manages 80,000 cows on a series of 100-1,000 cow units.
Other company’s such as Aust-Asia and Modern Dairy have established some of the largest dairy farms in the world, with Modern Dairy’s unit west of Beijing milking 20,000 cows through eight 80-unit rotary parlours at any one time. One of the cow sheds is reputed to be 10ac in size.
While Modern Dairy now owns 200,000 cows in total, Aust-Asia is looking to bring it’s 59,000 cows to 100,000 as soon as possible.
When its general manager, Yang Ku, was asked on a recent trip to Ireland if he was interested in the possibility of setting up operations here, he simply laughed.
«Irish farms are too small -we need enough room to grow our herd to 100,000 cows,» he explained.
However, he was envious of an Irish climate that allowed such a cheap and plentiful supply of grass to be grown.
He, like every other Chinese producer, knows that their production costs leave Chinese milk powder over €900/t more expensive than its New Zealand equivalent.
Many Chinese dairy farms rely on far flung locations such as California, Australia and South America for basic feedstuffs such as hay and alfalfa.
The current trough in world prices has created serious problems for China’s flagship dairies. Modern Dairy and Aust-Asia have between 60t and 300t of unsold milk per day. Some is sold on the open market, but most is put through driers and sitting in growing stocks of Chinese milk powder that is too expensive to compete with imports.
Instead, dairy farm managers like Mr Yang are taking every step possible to temporarily reduce output.
«We will increase the culling rate from 24-25pc to 28-30pc. We will also increase the dry period to 65-70 days to reduce the days in milk,» he said.
However, these ultra modern Chinese set-ups are still pushing ahead to maximise efficiency, even if it means higher output.
Through improved genetics, health protocols and feed-stuffs, Mr Yang is aiming to lift the average yield in his herd from 35kg per cow per day to 40kg. In relation to feed, he has broadened his purchasing parameters from just energy and protein levels to palatability, digestibility, and amino acid profiles. He believes that this alone will reduce feed waste from 5pc to 3pc.
But from an Irish perspective, the ability of Joe Public to afford premium dairy products is as big a concern as the rapid ramping up of domestic output.
Whether China’s economy is in trouble is debatable, but it is obvious that there has been a major slow-down in dairy consumption in the world’s most populous country.
Global Trade Atlas figures show that dairy exports from the EU were down in 2015, with Ireland’s sales alone down by 16pc compared to 2014.
The only exception is Infant Formula, where EU brands continue to grow and command a premium.
More recent figures for January show stronger numbers for Chinese imports in January this year, with volumes up across the board, but Australian and New Zealand product dominating supplies.
Dairy exporters hang their hopes on the rapid urbanisation of the Chinese population, because while rural dwellers consume 3.5kg of dairy annually, their high-earning urban counterparts consume 33kg.
Even lower income workers in urban areas consume significantly more than rural dwellers with an average of 15.5kg of product per year.
However, projections that average dairy consumption could be 44kg per capita by 2024 appear to ignore the wholesale shift in dairy product pricing to the luxury end of the market.
As long as China’s largest dairy companies pursue a product strategy that commands some of the highest retail prices in the world, Chinese consumption will be constrained.
Meanwhile, the stock-piling continues.
Source: Independent
