Due to impacts from the "melamine incident", China's dairy industry is under serious pressure. Statistics from the National Bureau of Statistics show that for the first nine months of 2008, China's output of liquid milk and solid dairy products was 11,269千吨和2,744,000 tons, up 9.16% and 4.75% respectively year on year, but down 2.91 and 2.59 percentage points respectively compared with the accumulated growth in the proceeding eight months. The output of liquid milk and dairy products in September was 1091,000 tons and 249,000 tons respectively, down by 18.7% and 15.59%, the first time for the monthly liquid milk output to go down. BOABC is of the view that, in September the exposure of the “melamine incident” in China has its impact on the dairy industry in general. Sanlu has to suspend production completely for rectification. Yili and Mengniu suffer from severe strikes. The production and sales of Bright and other enterprises of liquid milk, milk powder or dairy food tested melamine positive suffer from negative impacts to various extents. So in September and the years to come, a marked slide in dairy production in China is expected.

List

BOABC VIEW POINTS 3

SECTION I. PRODUCTION of MILK and DAIRY PRODUCTS 3

1.1 Raw Milk Production 3

Focal Points 3

Inner Mongolia 3

Hebei 4

Heilongjiang 4

Shanxi 5

Beijing 5

Shandong 5

Liaoning 6

Henan 6

Shaanxi 6

Gansu 7

Shanghai 7

Raw Milk Price 7

1.2 Dairy Production 8

SECTION II. DAIRY TRADE 9

2.1 Import Trade 9

2.1.1 Analysis of the Overall Import Trade 9

2.1.2 Analysis of Import of Main Dairy Products 10

2.2 Export Trade 15

2.2.1 Export of Fresh Milk 15

2.2.2 Milk Powder Export 16

SECTION III. MARKET TRENDS OF DAIRY PRODUCTS 19

3.1 Retail Price of Fresh Milk 19

3.2 Price of Bulk Packaging Milk Powder 20

SECTION IV. TREND OF DAIRY ENTERPRISES AND INDUSTRIAL INTEGRATION 20

4.1Yili 20

4.2 Mengniu 21

4.3 Bright 21

4.4 Sanlu 22

4.5 Sanyuan 22

4.6 Wahaha 22

4.7 Xiajin 23

4.8 New Hope 23

4.9 Junlebao Dairy 23

4.10 Diequan Dairy 23

4.11 Yakult 23

SECTION V. NEW TECHNOLOGIES AND NEW PRODUCTS 24

Trans-genetic Technologies Used in China for Cattle Breeding 24

Chr Harsen Robotics Tablets 24

SECTION VI. NEW PROJECTS OF THE MONTH 25

Ningxia: First Phase Project of Wuzhong Hengfeng Dairy under Wahaha Commissioned 25

Gansu: Garden Dairy to Invest 200,000,000 RMB for the construction of Standard Dairy Farming Districts 25

Jiangsu: 1st Phase Project of Lujian Dairy Yanhu Dairy Farm Formally Commissioned 25

Beijing: Sidel, the Sub-Company of Tetra Laval, Opened its New Factory in Beijing. 25

SECTION VII. RELEVANT POLICIES 26

ABOUT BOABC 29