China had more than 12,300 dairy farmers' cooperatives as of 2010, the latest figure available, said Ma Ying, deputy director of the dairy industry management office of the Ministry of Agriculture.

"The figure is almost twice that of 2009, which shows that the development of dairy cooperatives have been robust," she said.

But she warned that authorities should make sure that cooperatives truly represent the interest of farmers.

Establishing cooperatives is also key to protecting the financial interests of dairy farmers, who have long suffered from low profit margins due to the rising cost of forage crops.

The price of raw milk has stayed stable from 2011 to June 2013 while the price of forage crops have increased 22 percent during the same period, the Ministry of Agriculture said.

As a result, the country encountered a severe shortage of raw milk last year, with raw milk production, which was 35.31 million metric tons in 2013, declining 5.7 percent from the previous year.

The shortage, coupled with a ban of imports of whey protein powder and whey protein concentrate produced by Fonterra in New Zealand after a contamination scare, has also resulted in a price spike in raw milk, which increased from an average of 3.2 yuan (53 cents) per kg to an average of 4.2 yuan nationwide.

Ma, from the dairy industry management office, said even though the price surge has benefited farmers, the increasing prices have failed to cover the cost increases.

Bi Yu'an, an inspector with the food safety supervision department of China Food and Drug Administration, said, "When the country resumes imports of raw powder products from New Zealand, the dairy farmers will suffer losses again as foreign products are much cheaper."

Bi said a plan for cooperatives that makes farmers shareholders of dairy companies is the best way to protect farmers from price fluctuations.

However, Atze Schaap, director of dairy development in China at Royal FrieslandCampina, a Dutch dairy cooperative, said the success of cooperatives is also tied to the market success of dairy enterprises.

"A cooperative is not a guarantee for success. The cooperative must own a successful company, not the other way around," he said.