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Chinese dairies are addressing financial and experience issues

Karena Elliott for Progressive Dairyman Published on 15 June 2016
Walter Chen

Editor’s note: This article is the second in a series profiling sources for an in-depth feature about the Chinese dairy industry, appearing in print later this summer.

Walter Chen, Ph.D., spends half of his professional life in his native China and the other half at home with his family in California.

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Born and raised in China, Chen received his bachelor’s degree in animal husbandry at the Southern China Agriculture University. He did work for his master’s and Ph.D. in ruminant nutrition at the University of Arizona between 1989 and 1994.

Upon graduation from Arizona, Chen returned to China where he managed the large Canton American Flower Loung Dairy for two years. In 1996, he joined Cargill Animal Nutrition. By 1998, he had become an independent nutrition consultant and personally owned a 500-cow Jersey dairy in California.

Today, Chen’s Beijing Kai Hang Management Consulting Co. Ltd. includes 10 consultants who live in China full-time. The staff covers nearly 350,000 cows in China, including the Mengniu Fuyuan Dairy Group with 45,000 cows, the Yili Youran Dairy Group with 88,000 cows, Kedong Nautural Farms with 50,000 cows, Fonterra China Farming with 60,000 cows and Huaxia Dairy Farm with 20,000 cows.

“My U.S. dairy experience is very important to me,” Chen explains. “Even though there are differences in climates, feed and feed quality in China, there are a lot of similarities, such as facilities, milking equipment and feeding practices.” Most of the dairy farms Chen works with in China are also confinement operations.

Walter Chen's consulting team

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One key difference for Chen and his colleagues, however, is the financial environment.

“I am still learning how to best approach the economic issues in China,” he says.

According to Chen, dairy economics in China are currently at a low point even though milk price is still much higher compared with the U.S. Per liter of milk, the current farm gate price is 3.50 to 3.80 RMB (Chinese currency) or USD $24.40 to $26.50 per hundredweight.

Chinese feed cost is roughly 50 to 60 percent of milk revenue.

“Imported alfalfa hay costs around $430 per metric ton delivered to the farm,” Chen says. “Corn silage costs about 75 to 80 dollars in most parts of the country. Grain costs, including soybean meal, however, are currently low.”

Labor expense in China also remains low, but it has increased significantly since 2008.

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“A full-time parlor worker was paid 200 dollars per month in 2008; today that person is making 500 dollars per month,” Chen says. “A farm manager of 3,000 cows used to get paid 1,500 dollars per month; in 2016, it's 4,500 to 5,000 dollars monthly.”

The big issue with all of Chen’s clients is labor efficiency. “A farm of 5,000 cows usually employs 160 to 180 people in China,” he says. “Therefore, total labor cost is high.”

Although replacement cost is lower now in China at $3,000 per head, a couple of years ago, it went up to nearly $5,000 each.

“Cull cow price has come down but is still very good at 2 dollars and 60 cents per kilogram or 118 dollars per hundredweight,” Chen explains. “A 700-kilogram cull cow brings more than 1,800 dollars today.”

Walter Chen at a forum

With the milk price and beef price in China, its obvious Chen advises his Chinese clients to cull low-producing cows in the herd.

“But still some producers like to keep those cows,” Chen says. “It's very common in China for people to breed their cows all the way to the dry pen.”

Chen finds his Chinese clients are lacking basic dairy experience and many skills U.S. producers take for granted.

“Nutrition is not the only problem that my clients are facing,” Chen explains. “I am trying to help my clients start from the basics, whether it’s related to health, reproduction or feeding.”

His staff works as a team to address those needs. “Some are focusing on milking parlors and milk quality, while others are working on feeds and feeding,” he says. “I also have an IT team that focuses on herd data analysis. They provide the consultants and the clients with timely reports that point to both problems and trends.” Chen believes this final component helps his team troubleshoot problems when they are at the farms.

“My goal is to help my clients make the right decisions on a day-to-day basis,” he says.

Chen relies heavily on technology to maintain contact with his staff while he’s stateside two weeks each month.

“While I am at home, I work with my team and my clients through WeChat, email, phone calls or Ding Ding, a mobile based app,” he says. “It seems to be working well.”

During his lifetime, Chen has witnessed first-hand how the perception of milk has changed in his homeland.

“More and more people recognize the nutrition of dairy products, especially among the young Chinese,” he observes. “Young people in China like Western food,” he says. “Every time I go to Pizza Hut there, it’s always packed with young people.”  PD

Karena Elliott is an international freelance writer who makes her home in Amarillo, Texas.

PHOTO 1: “My goal is to help my clients make the right decisions on a day-to-day basis,” says Dr. Walter Chen.

PHOTO 2: Dr. Walter Chen’s Beijing Kai Hang Management Consulting Co. Ltd. includes 10 consultants who live in China full-time.

PHOTO 3: “I am trying to help my clients start from the basics, whether it’s related to health, reproduction or feeding,” explains Dr. Walter Chen. Photos provided by Walter Chen.

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