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2014-R3 Farm Development

2018-8-14 14:54:35 Comments:0 Views:463 category:Project Introduction

Cow Farm Size Development in North China

3.1 About Principle Investigator

Short Curriculum Vitae
2006.12        Ph.D, Economics, Washington State University
2003.6        M.S., Agricultural Economics, Chinese Academy of Agricultural Sciences
1998.6        B.S., Economics, China Agricultural University

Fields of Specification
Consumer and health economics
Food safety and policy
Environmental economics and sustainable development

Professional Experience
2014-present     Professor, College of Economics & Management, China Agricultural University.
2016.1-present    Director, Center for Food and Health Economic Research (C’FHER), CAU.
2015.7-present    Visiting professor, Department of Agricultural and Resource Economics, UC Davis.
2013-2014    Associate professor, College of Economics & Management, China Agricultural University.
2009- 2013    Assistant and Associate professor, Center for Chinese Agricultural Policy, Chinese Academy of Sciences.
2007-2008    Research associate, International Marketing Program for Agricultural Commodities and Trade (IMPACT) Center, WSU.

Personal Web

3.2 Objectives of the study
(1) To understand the status quo of cow farming and the distribution of cow farming in terms of herd size in the Great Beijing area. 
(2) To study the impacts of growing scale on cow farming practices and production efficiency.

3.3 Main report of the research:

3.3.1 Background
Dairy farming in many countries has experienced a small to large scale expansion. MacDonald, et al. (2007) found that from 1970 to 2006, the number of dairy farms in the United States reduced from 648,000 to 7,500, reduced by about 88%. During the same period, the average herd size increased from 19 to 120; Zimmermann and Heckelei (2012) indicated that in the EU 15 countries the number of dairy farms declined at an annual rate of 3.5% from 1995 to 2005. Similar pattern can also be found in Japan (Schluep Campo and Beghin, 2006), South Korea (Song and Sumner, 1999; Lee, et al., 2006).
Dairy farming scale in China is experiencing the similar evolution as in above developed countries. Lu, et al. (2009) study shows that in the early 21st century, China's dairy farming was dominated by small-scale farm. On average, 80% of total milk production was from small-scale cow farming. At the same time, the number of dairy farmers was rapidly reducing. This is also true in traditional dairy production provinces (Jia, et al., 2012). According to Dairy Industry Development Report, there were 344 cow farms in China with herd size over 500 heads in 2002, with average 1,451 milking cows in each farm. The well-documented food safety issues partially contributed to the rapid development of cow farm scale (Xiu et al., 2010).
The growing herd size is the result of changes in production mode, but it will in turn bring new impacts on dairy production, such as technology adoption, negotiating power in market, environmental pressure, new practices and standards for milk safety control, commercial feeds utilization, and so on. However, empirical analyses on the economic impacts of the increasing herd size on these aspects are insufficient in China. Several questions in particular include: (1) How will the growing herd size affect cow farmers’ new technology adoption, practices in managing inputs, food safety, manure treatment, and so on? (2) Given various constraints, what would be future trend of cow farm development? And (3) What are impacts of cow farming scale development on milk quality and market development? Answering these questions are undoubtedly able to draw some implications for policy making and the sustainable dairy industry development in the study area and beyond. 

3.3.2 Data 
The data used in this study are from a field survey conducted in Beijing, Tianjin and Hebei in the summer of 2015. Through local dairy associations and related government sector, we selected 126 cow farming units by herd scale measured in cow inventory size in 2014 (including farm scaled less than 100 heads, 100-299, 300-499, 500-999, 1000-1999, and 2000 or above) for the survey. The survey was done by interviewing the representative from each selected unit in paper and face-to-face. The total sample includes 67 cow farming units from Hebei, 21 units from Tianjin, and 38 units from Beijing. 

3.3.3 Main results from the survey
Small-scale cow farms are in a fast track to disappear. As shown in Figure 3-1, farms with less than 100 head of cows in inventory in the sample only accounts for about 20 percent. In contrast, farms with 500 head of cows or more accounts for about half in our sample. In Beijing and Hebei, cow farming is almost dominated by large-scale farm units who have cows over 300 heads in 2014. It must be noted that this result might heavily related to our sampling method. To what degree this result can reflect the population in this area is a question we cannot answer due to information limitation. Even so, this result, along with our field observations, strongly suggest that the space for small-scale farms has been shrinking rapidly in recent years in the study provinces. 

1. Cow farm scale has been moving up fast in the area. The survey results show that there were about 3.3 percent of cow farms operating in in small-scale, having less than 100 heads in inventory, in the area in 2010, but this size of farms has completely moved up to larger scale in 2013 and 2015. Noted that the small-scale farms that have run out of business since 2010 cannot be captured in our survey. During the same period, even the proportion of medium-scale farms (100-300 heads) in total number of operating farms has declined. In contrast, large-scale farms (500+) or even super large-scale farms (1000+) have sustainably expanded.  From the point view of farm operational model, enterprise running farms (refer to as “enterprised farm”) dominates in our sample, accounting for 73.1 percent in unit number in our sample (Figure 3-3). Following it is family-based farms (12.5 percent) and farm base (yang zhi xiao qu) (9.6 percent). Farms operated by integrated enterprises in dairy industry (yi tiao long qi ye) (refer to as “integrated farm”) and farmer corporative (refer to as “Coop-operated farm”) together contribute to 5 percent in the sample in terms of sample unit. Farm scale varies by farm operational model. For farm base, medium-size (300-500 heads) and large size (500 heads or above) dominates, together accounting for near 80 percent. For family-based farms, the most common size is less than 300 heads. 

2. The expansion of cow farm positively contributed labor input efficiency and labor quality.  As we can see in Figure 3-4, employee number declines sustainably with farm size expansion. For farms scaled between 100 and 300 heads of cow, roughly 4.6 employees are needed for per hundred cow, while the number sharply declines to 2.5 persons for farms scaled 2000 head of cow or above. Moreover, as farm size goes up, the proportion of full-time employees in total labor forces hired increases. For farms with 500 heads of cow, over 90 percent of employees are full-time labors. The proportions of skilled employees and highly educated employees in line also increase with farm scale growth (Figures 3-4 & 3-5). 

3. A majority of farms in our sample are well equipped with infrastructure and modern facilities. As shown in Table 3-1, modern facilities such as ventilation and cooling system, manure collection and treatment system, batching house, milk cooling tanks, and milking house have been fully equipped in various scale of farms.  The adoption rate of soft bed, software for farm base management, and DHI are also linearly growing farm scale and to rise to over 80 percent for farms scaled 500 or above. 

4. Yield rises with herd size expansion, but is quite varied by operational model. In 2015, a milking cow averagely produce 24.1kg of milk per day in small scale farms with less than 300 heads of cow, and near 30kg in large scale farms with more than 1000 heads of cow in line (Figure 3-6). The maximum and minimum yields are also increasing with farm scale with slight difference in variation. By operational model, integrated farms have the highest yield, producing 32kg per milking cow per day, which is about 5 kg higher than that of enterprised farms (27.6kg), family-based farms (27.4kg), and coop-operated farms (26.5kg). Farm bases, on another side, produce the lowest yield, being just 23kg per milking cow per day. 

5. Larger farms averagely perform better in milk safety than small-scale farms, but farm size does not affect nutrient content significantly. The results presented in Table 3-2 indicate that the number of cell and bacteria per ml of fresh milk is about 403,000 and 193,000 units, respectively, in farms scaled less than 300 heads of cow. Both numbers go down sharply for farms with scale greater than 300 heads and become stagnated. The stagnation suggests that once farm scale reaches 300 heads high, further size expansion will not be that beneficiary in milk safety improvement. The improved performance in cell and bacteria numbers ensure that the large-scale farms with higher sale price in market and lower sale rejection rate in comparison with their small-scale counterparts.  Table 3-2 also shows that integrated farms perform the best in all safety and nutrition indicators listed, while farms at farm base are on another side in overall, suggesting that the farm base model which once was highly expected in solving milk safety problems since the disclosure of melamine-contaminated baby formula indeed lack ability for sustainable development. 

6. Feed cost per cow is significantly lower for large-scale farms than medium- and small-scale farms. Ration per cow is 158 yuan for farms scaled less than 300 cows, which is about 50 yuan higher than medium- and medium-large-scale farms (300-1000 cows), and nearly twice high as that for large- (1000-2000 cows) and super large-scale farms (Table 3-4). Roughage and concentrate evenly contribute to ration cost at all farm scale levels.  By farm operational model, farms in farm base have the highest ration cost, largely due to the highest concentrate uses, and integrated farms have the lowest ration cost (Table 3-5).

7. Farm size may further expand in the area in the future. During the survey, we asked the owners of selected farms about their future plan for farm size development. The results show that on average about half of farms planning further expansion while about one the third said they would not change and only small proportion of farms planning to reduce farm size. Also, as one can clearly see that, the larger farms the more aggressive in the future size development. 

3.4 Conclusion 
Our findings in this study consists of one concluded part and one likely but unconcluded part. The concluded part is, feeding cost, production efficiency, milk safety, farm management, and so on so forth, are all benefited from cow farm size growth in the study area. 
The likely but unconcluded part is about the farm size itself. The observed farm size from our survey is way beyond (above) our anticipation.  If one calls the representative family based cow farming model in EU countries and the representative commercial cow farming model in Japan and Korea as modern cow milk production model, we would say that cow farming in the Great Beijing area has turned into a post-modern era. This is not only talking about the way larger farm scale compared to China’s industrialized counterparts, but also about the definitely comparable farm infrastructure and modern facility equipment, and the yield as high as in Japan, Korea, and the United States. And, the farm size in the study area is still growing, and potentially not stop in a near future. The reliability of this finding depends on to what extent our sample can represent the population in these three provinces, which unfortunately goes beyond our capacity to test at this moment. But, our field observations, along with the encountered extreme difficulties in finding the “anticipated” small-scale farms during the survey, tell us, the found farm size, even if unconcluded, could be very likely true. 
At the end, we would like to share our mixed feeling by looking at this likely true result. On one hand, it is no doubt that the growing farm size has positively contributed to cow milk production in multiple dimensions as we have realized. This is good. On the other hand, we cannot help asking ourselves, have we gone too far away from we should?  In 2008, the globally well-known melamine-contaminated baby formula scandal and a number of following scandals disclosed have boosted a series top-down policy interventions and massive social and industrial responses.  As a result, China’s cow farming industry has headed to a fast- or faster track toward a happy world full of large-scale commercial cow farms. But there are at least three big concerns in our mind: 
First, why we have not seen a significant drop of milk price in store? I have to check around very careful in front of store shelves full of small but extremely expenditure milk boxes when I am in China, but I don’t even look at the price label when I am shopping in stores in the US and many countries in Europe. Why? Has China’s dairy become a capital game? If the significantly improved production efficiency due to scale development could not eventually benefit consumers, why do we need them to be large? 
Second, with the rapid expansion of farm size, the competition between farm and local residents for natural resources such as arable land, surface and ground water, the negative impacts on local ecosystem due to manure disposal, and potential anthropozoonosis, etc. will certainly become severe and severer. And, it is not completely impossible for some cases to develop into badly social events. There are a lot of lessons we can learn from the world. So, why do we need these cow farms to be so huge? For conventional dairy countries, average farm size never become this huge as we saw in the study area. Netherlands, a traditional dairy producer and exporter in the world, average farm size is less than 55 cows. Ireland, another long-history dairy exporter in the world, average cow farm size is about 60 cows. New Zealand, grassland farming and the largest dairy exporter to China’s market, average farm size is less than 400 cows. Australia, another significant player in milk exports to China, average farm size is about 280 cows. Japan, following its near fifty-year farm size growth since the 1960s, average farm size in commercial cow farming today is slightly above 70 cows. Korea, another commercial cow farming Asian country, average farm size is about 70 cows. The United States, the largest milk producer in the world, average cow farm size in commercial farming is below 200 cows. India, this second largest milk producer in the world, average farm size is between 1 and 3 cows. 
Last, but the most important, is it surely right to force real small-scale, say several tens of cows, and family based farms out of business? Around the world, in almost all countries, cow farming is family based production. This include almost all countries named right above. In those countries, family based small-scale cow farms have been proven to be the most efficient model in cow milk production. This is especially true if we count job creating, smallholder farmers’ substantial needs and welfare, environmental impacts, and sustainable development, etc. into consideration. But, in China, a country which has more than thousands times more rural population than in these developed countries, why do we have to force these smallholders out of business in cow farming?

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