Crying over spilled milk in Vietnam

PHU DONG, Vietnam — Hoan Trong Thuyen, 69, stood over the 2-ton stainless steel milk storage vat with a grim expression.

“It’s been here two days already,” Thuyen said. “If the dairy company doesn’t come to buy it tomorrow, we’ll have to pour it out.”

Thuyen is the chairman of the Phu Dong Dairy Collective. Farmers in this small town 10 miles southeast of Hanoi use the collective to sell their milk to large dairy companies. Since farmers here began raising dairy cows in the 1990s, milk has lifted dozens of families out of poverty and made Thuyen a millionaire.

But for the past two months, farmers in Phu Dong and some other dairy regions across northern Vietnam have been pouring their cows’ milk away — in streams and rivers, on fields and roads. Demand for milk fell sharply in Vietnam last fall, after reports that vast quantities of fresh and powdered milk from China were tainted with the industrial chemical melamine.

In September, tiny amounts of melamine turned up in milk marketed by Hanoimilk, a large state-owned dairy company that mixed fresh local milk with imported Chinese milk in some of its brands. When customers found out, Hanoimilk’s sales plummeted, and it cut its local milk purchases by half or more.

Other milk companies, whose milk never tested positive, have seen demand recover, and farmers who supplied milk to those companies are doing well. But Hanoimilk’s suppliers were stuck with their surpluses.

“At first the farmers just poured it out in the field next to the collection station here, but now they have to go find a stream or a pond,” Thuyen said. “It was polluting the field.”

The farmers are suffering the consequences of the Chinese melamine scandal, even though farmers in Vietnam have never used melamine. The reason is lack of trust. In a country where counterfeit goods are widespread, corruption scandals are common, and the press is often unreliable, the Vietnamese public does not trust anyone to assure them that Hanoimilk products are safe again.

The lack of trust persists even though the government and dairy companies have conducted an impressive melamine inspection campaign. Beginning in late September, the Ministry of Industry organized 15 teams and 22 laboratories to go through the country’s entire retail supply of dairy products. Melamine was found in several dairy products imported from Singapore, Australia and China, and they were pulled from the shelves. The press here reported widely on the recalls.

Dairy companies including state-owned Vinamilk and foreign-owned Dutch Lady, a Unilever subsidiary, quickly ensured that their suppliers were not using melamine. They never reduced their local purchasing levels, which are governed by long-term contracts with individual farmers.

But many of Hanoimilk’s farmers had no long-term contracts. That is the main reason they are suffering, according to Raf Somers, an adviser with the Vietnam Belgium Dairy Project. The project, funded with Belgian government development aid, has helped modernize the Vietnamese dairy industry by convincing companies like Vinamilk to sign long-term contracts directly with individual farmers, rather than relying on intermediaries such as dairy collective chairman Thuyen.

“The stories that we’ve seen in the local news are farmers that did not have a contract,” Somers said. “It’s only a really small percentage of the farmers that cannot sell their milk.”

Somers said Vietnamese dairy companies had moved to individual contracts with farmers in order to guarantee their own supplies, guarantee to farmers that their milk would be bought, and to oversee quality testing. In the old collective system, intermediaries like Thuyen do quality control — testing milk for protein content — and then store it for sale to dairy companies. There is no incentive for individual farmers to improve quality, because their milk will be lumped in with that of every other farmer in the village.

“It is really a matter of quality,” Somers said. Companies like Vinamilk and Dutch Lady can guarantee that they test their farmers’ milk themselves. And that is gradually building them the most precious of all commodities in Vietnam’s deception-plagued market: trust.

At one Hanoi supermarket, several customers said they were now buying as much milk as they had before the melamine scandal started. But they are buying Vinamilk, or foreign brands such as Dutch Lady and Nestle’s Milo.

Nguyen Ngoc Van, shopping for her two teenage daughters, said she was sticking to Vinamilk since seeing the news that Hanoimilk had tested positive for melamine.

“I’m just a regular person,” Van said. “I can’t be completely sure that the media are telling the truth.” But her children are used to Vinamilk, and the newspapers say it is safe.

Agriculture Ministry officials reacted angrily to media reports of milk dumping. Hoang Kim Giao, head of the ministry’s Livestock Department, said he considered the dumping a “crime."

In mid-January, the government convened a meeting between Hanoimilk and several other dairy processers, and secured an agreement that Vinamilk and other state-owned companies will buy up all of the surplus milk in the country.

But the rescue operation may come too late for many farmers in Phu Dong. Even several days after the government-brokered agreement to buy up surplus milk was announced, some farmers in the Hanoi area were forced to dump tons of milk that had passed the sell-by date.

Dairy collective chairman Thuyen said it costs about $6 a day to feed a dairy cow, and most farmers in Phu Dong are operating at a loss. If things do not improve soon, he said, Phu Dong’s poorer farmers would only have one way out.

“They have to sell the cow,” Thuyen said. “A cow used to cost over 20 million dong ($1200). Now it’s just 7 million ($400). A lot of people have sold their cows already. They sent their cows to the butcher.”

Other GlobalPost stories by Matt Steinglass:

For Which it Stands: Vietnam

Follow Matt’s ongoing reporting and observations on Vietnam in his Reporter’s Notebook.