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Thursday, October 30, 2008


SANHE, HEBEI PROVINCE, China – Spend an afternoon with the men who run the HuaXia Dairy Farm in Hebei Province and you soon suspect they are on a mission that’s more than simply about making money.

"We want to provide all the Chinese people [the ability to] drink fresh milk," said ER Hong, HuaXia’s Chief Strategy Officer, as we walked around the clean yet odorous farm that’s home to 5,000 cows and a lot of imported technology.
"In China right now, most people are not drinking fresh milk," continued the Taiwan native who says he grew up drinking fresh milk daily and talks about dairy as a basic human right. "Not many places can produce fresh milk."

It might sound like an odd pitch to make, given the bad press dairy products have been getting here lately. In September, the industrial chemical melamine was discovered in Chinese-made powdered and fresh milk and other dairy products sold in China and exported to parts of East Asia and Africa. Four babies died from kidney failure and at least 54,000 other young children in China have fallen ill as a result of drinking the tainted milk.

But HuaXia is poised to help overhaul the way millions of dairy farms operate across the country.

Bringing U.S. technology to Chinese agriculture
HuaXia was founded four years ago by Charles Shao, a 49-year-old information technology specialist, when he decided to pack up his life in Santa Monica, Calif., after the venture he was involved in sold to Google for a princely sum. "This was kind of a retirement for me," he laughed.

But when he arrived in China in 2003, he was determined to start his next adventure in an entirely different field. "[Some friends and I] were looking into either a vineyard or a dairy farm, and I choose the dairy farm," said Shao, whose mild manner belies an instinct for ambitious enterprise.

Adrienne Mong/NBC News
Hua Xia Dairy Farm has 5,000 cows, making it one of the largest in China.

Agriculture, as he saw it, was the last frontier in China’s economy. "If you try to set up a technology company here, there’s pretty much competition everywhere."

Moreover, there was an opportunity to make a real difference by focusing on agriculture. "The idea of dairy farming is actually to bring in U.S. technologies to do technology transfer so we can teach people in China how to do dairy farming correctly," he said.

It might sound presumptuous, but ongoing food safety scandals over the decades suggest Chinese farmers could use the help. Last month, melamine was discovered in not only powdered milk but also fresh milk, yoghurt, and some brands of cookies and candies.

And just this past weekend, authorities in Hong Kong found melamine in chicken eggs produced by a food distributor in the northeastern Chinese port city of Dalian.

Trying to regulate a fragmented system
The central government continues to take steps to try to address the problems of food safety; they include adopting a comprehensive food safety law and consolidating regulatory agencies to tighten oversight, but regulation may not be enough.

"We’ve found in other countries, when you have separate systems, one for the farm, one for industrial production, one for the retail sector and so on, it doesn’t work," said Jorgen Schlundt, Director of the World Health Organization’s Food Safety, Zoonoses, and Foodborne Diseases.

And China’s food production and supply chain is highly fragmented – especially the dairy system, which consists of millions of individual farmers who have been encouraged in recent years by government reformers seeking to promote dairy farming as an alternative income source.

"You have small-scale farmers that have four cows or eight cows," said David Oliver, an agriculture consultant. "They then sell to their larger milk companies. Quite often, they don’t have their own milking shed facilities like you would find in the U.S. So what they do every day is bring their cows to a community milking shed. The milk is then sent to the milk company. Sometimes those milking sheds are owned directly by the milk company but at other times they’re owned by a third party contractor."

It’s those third-party contractors who are suspected of being central in this latest scandal. Last week, six people were arrested for either selling melamine to milk suppliers or adding the chemical themselves directly to milk.

NBC News cameraman David Lom and assistant Ed Flanagan get up close and personal with the cows.

One of HuaXia’s operational advantages is its size. Of the 5,000 cows it owns – making it one of the top 20 largest dairy farms in the country – 1,000 are milking cows, producing 30 tons of milk a day.

All the animals are closely monitored for illnesses, and the milk produced is tested on a daily basis by the farm itself and on a weekly basis by an independent lab hired by HuaXia. The milk is then sent directly to a processing plant for packaging, eliminating the need for a middleman.

It’s a single-stream system – from the farm directly to the table – that experts like Schlundt and his colleagues at the WHO say is key to ensuring food safety.

Shao and his colleagues have invested in state-of-the-art equipment to help monitor the quality of their milk, thus making the farm work like an assembly factory.

"Even though we have U.S. technologies, we’re still in China," said Shao. There are no specialist herdsmen and farm labor is unskilled. "We instead have to compartmentalize and make our staff task-oriented," he explained. "The concept of high quality, quality assurance, and all these things is new to them."

HuaXia’s cows come from New Zealand or Australia, and the heavy equipment – like the mixing wagon to feed the animals, as well as the tractor required to pull the wagon – comes from the U.S.

Shao and his team’s efforts to run a tight ship are paying off. Not only have they easily weathered the milk scandal, their reputation for safe, fresh milk is gathering momentum. HuaXia already works with the U.S. Grains Council as a demonstration farm and training center for Chinese farmers. And the company is hoping to gain the seal of approval for quality and safety from the U.S. Food and Drug Administration.

"It’s possible to change how dairy farming is in China," said Shao. "We’re a good example!"