Dramatic discounts on dairy products are now a thing of the past in Beijing and Harbin supermarkets given new measures taken by dairy firms to eliminate price slashing incidents.

The two cities instituted these measures on July 23 after 14 dairy companies, including Inner Mongolia Yili Industrial Group Co. Ltd, Inner Mongolia Mengniu Dairy Industry (Group) Co. Ltd and Bright Dairy & Food Co. Ltd, came to an agreement last month to end the price wars.

According to the agreement, the companies will follow fair competition measures, bring long-term contracts in vigor with dairy farmers thus creating stable supply chains, while enhancing cooperation and accept public supervision in a timely manner.

Chen Xin, secretary-general of the Shanghai Dairy Association, also indicated that this agreement would see rock-bottom dairy prices rise to normal levels.

A 500ml package of milk from Inner Mongolia Yili Industrial Group Co. Ltd has recently cost around 1.9 yuan in certain Beijing supermarkets, close to the price of a Tetra Pak package for milk producers, making the prices out of line with the Law of Value and creating a harmful situation for both producers and farmers, said Fan Xueshan, head of the Beijing Dairy Association.

The cost of raw milk rose by around 0.15 yuan per kilogram notably due to the increased prices of corns and alfalfas, used for raising cows. While corn prices were rising 16.32 percent year-on-year by June and with alfalfa prices soaring over 20 percent in the same period, profits for dairy farmers were still on the way down, with around 40 percent of farmers being affected, revealed the Ministry of Agriculture.

Currently, raw milk suppliers were making a loss of around 1,500 yuan per cow in benefits, as compared to last year.

The high costs and low purchasing prices have driven some farmers to reconsider and start selling livestock to beef producers, reported the Shanghai Morning Post recently.

(China.org.cn by Wu Jin, July 26, 2007)