Chinese dairy farmers 'milked' by Nestle

Updated: 2011-10-24 21:53


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HARBIN - Several Chinese milk farmers have claimed that Swiss food giant Nestle has pocketed part of their pay for years, stating that local vendors working with Nestle have shortchanged them.

Zhao Yongwu, a farmer from the city of Shuangcheng in Northeast China's Heilongjiang province, said he was shortchanged by 1 kg for every bucket of milk he sold to a purchasing station owned by the Shuangcheng Nestle Company, a subsidiary of Nestle.

A pact signed in 2002 between the city of Shuangcheng and Nestle said that the city, which is home to more than 20,000 milk farmers, should have no other dairy firms and that all milk produced in the city must be delivered to Nestle, according to the city's animal husbandry bureau.

"They are always shortchanging us. Some of us are so angry that we would rather kill our cows than send the milk to Nestle," Zhao said.

In another village, purchasers told a farmer surnamed Li that his two buckets of milk weighed 91.25 kg, while Li believed they were shortchanging him by 1.25 kg.

"I have gotten used to this, as it has lasted for many years and is known to all," he said.

Milk farmers in Shuangcheng also complained about the purchasing stations' rounding methods, which they say allows them to manipulate their measurements to make the milk appear to be lighter.

The farmers have also complained about the purchasers classifying their milk into four grades, with only "grade one" milk allowed to be sold at 2.97 yuan ($0.46) per kg, a price set by the provincial government to protect farmers.

The farmers said that if someone supplies milk that is later rated as "grade four," he or she will "suffer from a low price of no more than 2.7 yuan per kg for a month."

"But they never show us the laboratory sheets. Even if you are reluctant to accept the results, you have nowhere to complain because they have a greater say," another farmer said.

Li Zu'an, an official with Shuangcheng Nestle, said the company did pay farmers according to the grade of their milk, adding that the milk grade payment system was only used until July of this year.

"We have heard some complaints from farmers. In 2002, a station chief was sentenced and others were dismissed for dishonest acts," said Huo Zhihong, deputy chief of the Shuangcheng animal husbandry bureau.

Milking by hand

In Heilongjiang province, Shuangcheng is one of only a few cities where milking machines are scarcely used, despite the Ministry of Agriculture's efforts to make the modernized device popular in regions with a developed dairy industry.

Xinhua reporters found that none of the 76 purchasing stations in Shuangcheng were equipped with milking machines. Several farmers have had to buy used machines with their own savings.

Farmers believe that Shuangcheng Nestle allows them to milk cows every day for the purpose of keeping costs low. A single milking machine costs 7,000 to 8,000 yuan, which is a big sum for most farmers.

An industry insider who refused to disclose his name said that milking by hand raises concerns over food safety, but equipping all of the stations with milking machines would cost the company tens of millions of yuan.

Building a mechanized station in each of the 246 villages in Shuangcheng would mean an even greater investment, he said.

However, Li Zu'an said "milking machines have their own shortcomings and they can cause cows to contract infectious diseases."

Behind the monopoly

Shuangcheng Nestle's milk monopoly remains untouched, although dissatisfaction among farmers has continued to grow over shortchanging, an absence of milking machines and low prices.

Prices were as low as 1.6 yuan per kg before the provincial government set milk prices in 2010, farmers said. At that time, the city government even mobilized police officers and agricultural officials to prevent farmers from selling milk to other firms.

Official statistics show Shuangcheng Nestle has long been a major taxpayer in the city. In 2004, the joint venture paid taxes of 370 million yuan, or 64 percent of the city's total fiscal revenue. The company paid 280 million yuan last year, or 17 percent of the city's total.

The taxes partially come from farmers' economic losses, the insider said, adding that the company can save 70 million yuan every year if prices are cut by 0.2 yuan per kg.

Deputy mayor of Shuangcheng Wen Liheng said that the city government has a 2.99-percent share in the joint venture, with a former mayor being the board chairman. But Zhang Yili, director of the provincial office of dairy industry management, insisted that the government should not be allowed to run dairy firms or milk purchasing stations.

Shuangcheng Nestle maintains its monopoly by making the local government a stakeholder and paying large amounts of taxes, while the government takes the company under its wing for money, an anonymous expert said.

"The 'Nestle model,' which violates market rules and creates disorder in China's dairy industry, will have a bad impact on the economy once it is copied by other firms," he warned.