Got Milk

Food Policy 31 (2006) 201–215 www.elsevier.com/locate/foodpol

Got milk? The rapid rise of China’s dairy sector and its future prospects

Frank Fuller

a b

a,*

, Jikun Huang b, Hengyun Ma c, Scott Rozelle

d,1

Center for Agriculture and Rural Development, Iowa State University, 575 Heady Hall, Ames, IA 50011, United States Center for Chinese Agricultural Policy, Institute of Geographical Sciences and Natural Resource Research, Chinese Academy of Sciences, China c Center for Agricultural Policy and Rural Development, College of Economics and Management, Henan Agricultural University, China d Department of Agricultural and Resource Economics, University of California, Davis, United States

Abstract This paper synthesizes recent research and new empirical findings to build a more comprehensive understanding of developments in China’s dairy sector. China’s tremendous rise in dairy demand has been driven by several mutually reinforcing factors: including rapid income growth, promotion by the government and dairy industry, changes in urban lifestyles, and the development of new, more sophisticated marketing channels. Domestic milk output has grown to satisfy rising demand largely by increasing the dairy herd. Substantial increases in productivity have been achieved through technology adoption, but there is evidence that the torrid growth has created inefficiencies because adaptations to marketing rules, infrastructure, and institutions have not kept pace with the changing environment. These results suggest there is ample room for future growth in both domestic milk production and dairy demand, but multinational firms and imported products will likely play and increasing role as China’s dairy market continues to develop. Ó 2006 Elsevier Ltd. All rights reserved.

Keywords: Dairy; China; Productivity growth; Technical efficiency; Technical change; Consumption analysis

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