In early 2014, Nguyen Thi Thanh Hoa borrowed VND1 billion (US$47,068) in bank loans to invest in a 20-cow farm in the Central Highlands province of Lam Dong, and now does not know what to do with the 150kg of milk they produce every day.
Milking only results in losses, but otherwise the dairy cattle will die, “so I have to save the cows,” the farmer, based in Tu Tra Commune of Don Duong District, lamented.
Tu Tra is a key dairy cattle raising area of Lam Dong, with a herd totaling more than 2,600 cows. However, half of these are raised by farmers who have not contracted any dairy firms to be the permanent buyers of their products.
Nguyen Dinh Tai, another dairy cattle keeper, had to seek buyers for his milk in other districts on his motorbike on a daily basis.
“But each customer only bought a few liters, so sometimes I had to dump the milk,” Tai said.
Some 4.5 tonnes of milk produced daily here are either unable to find buyers, or sold at a dirt cheap price of VND7,000 ($0.33) a kg, according to the Lam Dong agriculture department.
A profitable price for breeders is VND14,000 ($0.66) a kg, if they sell to dairy producers such as Vinamilk, Dalat Milk or FrieslandCampina Vietnam.
But the companies say breeders should have discussed their plans with them before buying the cattle. “Farmers cannot just pass responsibility to us when they cannot find an outlet for their milk,” the dairy firms said.
Elsewhere, in the southern province of Long An, many dairy farmers have also fallen into the same tough spot. Nearly 100 households in Duc Hoa District have started raising dairy cows over the last year, adding 500 cattle to the district’s herd, according to a local animal healthcare official.
There are now around 5,800 dairy cows in Duc Hoa, far exceeding the buying plan of local dairy firms, so farmers have faced challenges in distributing their milk, the official added.
In the meantime, the total dairy cattle herd in Lam Dong has amounted to 14,000 cows.
“In 2014 the number of cows rose 72 percent from a year earlier,” said Nguyen Van Son, deputy director of the provincial agriculture department.
Farmers jumped in to raise cows in the hope of selling milk to major firms, but they “took a reverse approach,” Son said.
“While they were supposed to sign contracts with dairy firms before raising the cows, they did the last thing first,” he elaborated.
Dairy producers also blamed the breeders for their ill-planned business.
“Milk supply currently exceeds the storage capacity of our tanks so we have to prioritize buying from contracted farmers,” said Luu Van Tan, director of the milk development program with FrieslandCampina Vietnam.
Tan added that it takes up to six months for the company to add new milk tanks.
“During this time, we will sign no new contracts with dairy farmers,” he said.
Vuong Ngoc Long, technical director with Vietnam Dairy Cow Co., a Vinamilk subsidiary, said farmers should have contacted the company in advance if they wanted to sign a contract so “we could have time to check their farms for hygiene and quality standards.”
On the other hand, an expert with knowledge of the milk industry said dairy firms are reducing purchases of fresh milk from local farmers as the products, selling at VND13,000-14,000, are up to 50 percent costlier than imported raw material milk.
“Firms will mostly import the material to cut production costs,” he said.