On the outskirts of Nantongye village, a huge yogurt plant is under construction. It is planned that it may take all fresh milk produced by more than 3,000 cows raised by one third of the village households.

The plant owner is the Sanlu Group, whose baby formula was found containing the toxic chemical melamine that caused more than 6,200 children nationwide to have kidney stones.

Dairy farmers at Nantongye village were long-term suppliers to Sanlu, the biggest dairy producer in northern Hebei Province and nationwide, though villagers say they did not sign contracts with the company.

The company built five stations in the village to collect fresh milk, but since last Sunday it has stopped buying from farmers as all Sanlu plants have been suspended from production since the scandal was revealed.

Most farmers raise cows in small farms covering not much more than a courtyard. Li Zhidong's 18 cows produce about 160 kg of milk a day. In the past week, her earnings have dropped by 330 yuan (48.5 U.S. dollars) a day.

"I gave away the milk to family, friends and neighbors. Some feed it to their pigs. The rest I pour into the sewer," says Li, 56, who manages the farm with her husband. "All good milk. It's such a waste."

She has stopped feeding the cattle concentrated feed, giving them hay. Now they produce less milk each day.

"I have no choice but to cut costs," she says. "If the cows stop producing, it will take at least 10 months for them to give milk again."

Usually Li and her neighbors herd their cattle to a nearby milking station, where tankers collect the fresh milk and carry it to the plants.

"We did not add anything bad in the milk. We never even had the opportunity," Li says. "Those bad guys have put all of us in trouble."

Some of the 378 milk stations supplying Sanlu are like those in Nantongye village, directly run by the company itself, and others are owned by middlemen or big dairy farms.

Hebei police have arrested two brothers, surnamed Geng, who ran a station supplying Sanlu and charged them with adding melamine to milk.

"Sanlu did help us in our business and improved our lives," says Li. Her family earned about 10,000 yuan (1,470 U.S. dollars) a year from their cattle. Her son and daughter-in-law worked at Sanlu plants.

But the farmers are now in difficulty. Li's neighbor, Li Jufeng, plans to sell all 13 cows his father raised.

"My dad had a traffic accident two days ago. We need money to pay for his treatment," says the 32-year-old. "If we keep the cattle, we cannot sell the milk and have to spend money on them."

A father of a boy and girl, he worked for a Sanlu milk powder plant until the scandal broke. "I don't know what will happen to me and whether I will get paid this month."

The local government has been busy searching for new milk buyers. "Yili and Mengniu (two major dairy brands) had promised to buy our milk, but they just came a day and stopped because some of their products were also found with problems," says Zhang Junyong, an official in charge of agriculture at Tongye township government.

Four dairy firms in Hebei have reached agreements with the provincial government to buy some of the 2,500 to 3,000 tonnes of daily milk formerly supplied of Sanlu, a government source told Xinhua.

The government is also negotiating with Beijing-based Sanyuan Group and Shanghai-based Bright Dairy.

Some district governments and neighborhood committees in the provincial capital, Shijiazhuang, also approached dairy farmers. They carried fresh milk to government offices and neighborhoods and sold direct to residents.

Chen, a district government worker who declined to give her full name, bought 1.5 liters of fresh milk. "I paid 0.5 yuan (7 cents) per 500 ml. I heard the government gave an 0.5 yuan subsidy per 500 ml to farmers," she says. "The only problem is that fresh milk cannot keep for long."

Security of contract

Unlike Li in Nantongye, Zhou Dongji at Nanjiachun village continues feeding his 14 cows as usual.

The scandal has had little effect on him and 58 other dairy farmers in his village. Bright Dairy continued buying their milk though its yogurt products were also found containing melamine in a nationwide inspection.

"We signed contracts to sell only to Bright Dairy," says Zhou.

His cattle are not kept on his own farm, but a big farm with those of other farmers. In the eight-hectare lot, each farmer has one unit for their own cattle. They feed the cows themselves while the dairy company is in charge of milking, breeding, disease prevention and treatment.

In Wangdu county where Zhou's village is located, other dairy giants like Mengniu and Yili have set up similar facilities.

"It is always easier to control the quality of milk produced by contracted farmers than the independents as the latter sell to whoever gives the highest price," says Liu Chenfa, a Mengniu facility manager.

But insiders say some dairy firms refuse to contract farmers in order to avoid risk when supply exceeds demand.

(Xinhua News Agency September 21, 2008)