Reasons for China's milk scare

It did not take long for the euphoria of the Beijing Olympics to fade.

China's failure to produce good milk has killed at least four babies, and sickened many thousands of others.

Domestic and export markets in anything that might contain Chinese milk powder are stymied, and scores of dairy firms have gone to the wall.

The still unravelling saga has reduced China's reputation for food safety - and manufacturing integrity - to its lowest level in years.

Experts in the industry say the problems start at source - the cows.

Most farmers are poor and do not eat well - and neither do their cows. Average herds of just three to five cows are often kept in substandard, filthy conditions.

But bigger problems occur as the milk moves through the production chain.

Squeezed on price

The farmers have few means to monitor the quality of the milk they are producing. And their small business size gives them little ability to influence the market.

The farmers have no bargaining power when they sell the milk to middlemen, who are usually independent and unregulated.

The farmers get squeezed on price yet are under constant pressure to produce more milk.

So in order to meet the booming industry's gulping demands, and to cope with the ever lower prices paid for raw milk to smallholders, the milk is bulked up.

Several experts on the Chinese milk industry say this is where the additive process begins.

Ins and outs

"First they dilute the raw milk with water to increase its volume, often up to about 30%," said one of several experts who spoke to the BBC on condition of anonymity.

The problem is that the dilution also lowers the nutrient content of the milk, especially its protein, and that lowers the price paid for the milk.

That is when the melamine comes in. A nitrogen compound, it makes the milk appear to have more protein.

Until now, no dairy was testing its milk for melamine, not just in China but across Australasia, with consequences that are now known to be fatal.

The scandal has spread around the world to wherever China has exported its milk-based products.

Several babies in Hong Kong have also become unwell.