A dairy meadow in the Inner Mongolia autonomous region, a major milk-producing area in China. Xie Hang / for China Daily

Reshuffling to come

In response to the criticism regarding low protein levels, Yang says the problem could easily be rectified by providing high protein feed for the cows. However, with the current surge in feed prices, this doesn't appear to be an economically viable choice.

In Qingbao village, at least 20 percent of farmers have now sold their cows and taken other jobs, Yang says.

The reason for the confusion in the Chinese dairy industry was once summarized as "the extensive culture model", meaning that the wide geographical spread of the farms and the practice of individual farming prevented effective monitoring. However, the problems remained, even after all dairy farmers were drafted into collective farms.

According to Yuan Yunsheng, secretary-general of the Dairy Association of Hebei province, the real problem is a conflict of interests in the industry.

"The dairy companies and the farmers are always on opposite sides of the table," Yuan says. "When the market is thriving, dairy farmers will do everything they can to maximize their yields, but when business fluctuates, the dairy firms suspend collection."

This problem is common among all primary-products industries, Yuan says. He adds that farmers are at the bottom of the food chain, and are therefore the most vulnerable. Thus, if there is a disturbance, the very foundations of the industry can be harmed.

The result will ultimately be a lose-lose situation, Yuan says.

However, the dairy companies will never extend to upstream industry processes, because the breeding business is too risky and unprofitable.

Dairy firms much prefer to build processing factories, but very seldom build their own farms, an analyst say.

"Those charming pastures in the commercials are just for promoting the brand image, but the majority of the milk still comes through purchases from dairy farmers," says the analyst, who declined to be named.

Yuan is confident that the model will soon be changed; the nation's Consolidation and Development Plan for Dairy Industry, published in 2008, stipulates that dairy companies must increase the proportion of fresh milk they produce to 70 percent of the industry's total output by October.

But for the dairy farmers at Wangshengtan farm, it means they will again face a major transformation of their industry.

"Sometimes we just have to get used to these disturbances; although the industry is undergoing tough times, it is evolving," Yang says. "Those who survive will have the last laugh."