Hopes for a Chinese cash cow in France milk country sour – eDairyNews
China France |11 octubre, 2018

Milk | Hopes for a Chinese cash cow in France milk country sour

French farmers fear for future of dairy plant once billed as China’s largest foreign investment in the milk processing sector.

The opening of a Chinese-owned infant milk powder plant in a small town in the Brittany region of western France in 2016 was heralded as an economic saviour for the region and a win for French dairy farmers.

The €170 million (US$196 million) Carhaix factory would provide some 120,000 tonnes of high quality powdered milk a year to China, where demand for foreign infant milk products has soared after a years of food scares.

France’s biggest dairy cooperative Sodiaal signed a 10-year contact with Synutra, China’s third largest baby milk formula producer, to be the plant’s leading supplier. It would collect 288 million litres of milk a year from 800 farms in Brittany and beyond.

“No infant milk formula company in the world can produce such quantities,” Synutra France CEO Christian Mazuray said at the time.

But now Sodiaal, whose brands include Yoplait, Entremont and Candia, is negotiating with Synutra to purchase part of the Carhaix plant to recover its upfront investment.

Sodiaal confirmed plans in August, but has been tight-lipped about its relationship with the Chinese firm.

French media have otherwise painted a partnership soured by unpaid bills and milk formula exports to China that were 50 per cent less than forecast.

“The pitiful failure of the Chinese in Brittany.” declared La Croix newspaper.

“Dream becomes a nightmare,” reported Ouest-France.

Attempts to obtain comment from Synutra were unsuccessful.

“There will be no negative impact either on the level of collection, the price of milk or the shares,” Sodiaal’s president Damien Lacomb told Ouest-France last month in a bid to quell farmers’ fears about the future.

Beyond that, the cooperative, which describes itself as an organisation governed by and for its 12,500 producers, has revealed nothing more concrete about its plans – and French farmers are anxious.

“The Chinese mirage Synutra disappeared … and it was predictable!”, exclaimed a newsletter of the eastern France branch of the agricultural union, Coordination Rurale (CR).

“We are concerned about the pertinence of such a project, especially given the glaring lack of transparency and information about the move and what the future holds,” said Véronique Le Floc’h, CR’s secretary general and head of the National Organisation of Dairy Producers.

“The eventual repurchase of a production facility with no commercial outlet will inevitably impact the cooperative and the farms.

“What will be demanded of producers in the event of that?”

A report in Le Monde speculated that the Carhaix buy-back was part of a strategy for the French milk giant to sell to China direct.
But that may not be as easy at it sounds.

“To enter the Chinese market, you need Chinese partners”, said Pascal Nizan, a milk farmer representative for Sodiaal in Brittany.

He also said the current situation needed to be analysed in context: Synutra represented only 5 per cent of Sodiaal’s total milk output.

Elsewhere, farmers from a Normandy dairy cooperative have also complained about Synutra, after exports of growth milk under the Candia brand fell by almost a half since last year.

Synutra halted exports from Les Maîtres Laitiers du Cotentin (Cotentin Dairy Masters) factory late last year on the grounds it had discovered protein residue at the bottom of packaging.

Some observers speculated that Synutra could be seeking ways to reduce its presence in France, for reasons that have not been made clear.

“This Chinese group would not seem to be the partner of choice,” claimed an article in the agri-food industry magazine, Process Alimentaire, which cautioned other French dairy co-operatives hoping for a slice of the lucrative Chinese market.

China has been a major importer of dairy products for 25 years and is now the world’s biggest importer of such goods. The Carhaix plant was billed as China’s largest foreign investment in the milk processing sector.

But Le Floc’h, a cattle breeder in Elliant, said farmers warned elected representatives and Sodiaal directors early last year of the “risk of seeing the Chinese abandon their orders” in Carhaix.

However, Sodiaal she said, reassured unions there was no such risk because “Sodiaal had a 10-year contract with the Chinese, and that the Chinese would not invest then just leave”.

Furthermore, concerned farmers were told they should stop worrying as they would “happily benefit” in the future from the capital gains generated by this agreement.
“Unfortunately, it is clear the fears expressed at the time have proven true much earlier than imagined.”

The farmers’ union is demanding a meeting with Sodiaal’s board of directors and a referendum on its bid for the Carhaix plant.

“We have been left in the dark, as rumours run wild and anxiety about the affair mounts,” said Marie-Andrée Luherne from the National Federation of Milk Producers.
“We, the milk producers, are the main ones affected after all.”

She said farmers were still reeling from January’s salmonella contamination scandal which saw Lactalis withdraw 12 million boxes of powdered baby milk from supermarket shelves, affecting 83 countries.

“Now once again producers are paying the price,” she told Terra, Brittany’s weekly farming journal.

“All farmers (in western France) are extremely worried about the possible impact on prices paid.”

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