The deal will enable Saikexing—China’s fourth-biggest dairy farming business—to invest in technology that will halt the discharge of untreated animal waste, and increase its use for fertilisers, irrigation, and energy.
It will also allow the company, which currently owns around 100,000 cows across 27 farms, to develop at least another four new farms with 20,000 cows in total.
“Food security and food safety are major concerns for China and this project will promote modern, sustainable dairy farming practices to minimise pollution and improve product safety,” said Martin Lemoine, ADB’s agribusiness unit head.
“It will also help set environmental and food safety benchmarks for dairy farming that will have great potential for replication elsewhere.”
As demand for processed milk in China has been growing, so too has the gap between domestic production and consumption been rising. According to Ministry of Agriculture figures, demand will increase from 9.7m tonnes in 2014 to 15.4m tonnes in 2024. Per-capita dairy consumption reached 36.1kg last year, up 5.9kg in 2008.
As safety concerns have spurred a consumer shift toward imported dairy powders, local manufacturers have been seeking ways to market fresh, safe, domestically produced milk as an effective long-term step towards meet rising demand.
Following eight years of tightened regulation, Chinese dairy is working hard to gain consumer trust, according to a recent report from the Dairy Association of China.
Official spot checks last year showed that 99.5% of dairy products were up to standard, while no illegal additives had been detected for seven consecutive years, the report said.
Twenty major domestic dairy companies account for more than half of the total output and revenue of the whole industry.
The ADB loan will help Saikexing to build modern treatment and processing facilities at a time when dairy farming in China is generating high levels of waste—a serious threat to groundwater and farmland.
Beyond enabling solid and liquid waste to be treated and recycled for fertiliser, irrigation and cleaning water, the loan will also finance the use of captured methane to produce energy for cooking and heating.
Funds will also be used to buy modern and sterilised milking and healthy feed processing equipment to boost the quality and safety of milk.
Operating in some of China’s poorer provinces, Saikexing expects its new farms to provide more than 600 new jobs by 2020. In addition to direct positions, the number of smallholder farmers that supply forage food to Saikexing is projected to grow from about 15,000 in 2015 to at least 17,500 by 2020.
The project is a first for Manila-based ADB, which has a focus on reducing poverty across Asia-Pacific, and marks its initial direct non-sovereign assistance to a livestock company, and its first private-sector agribusiness investment with a specific focus on both environmental protection and food safety.
The structure of the financing ensures that the project’s impacts are spread widely to farms across seven provinces and autonomous regions.