China supermarkets stripping US dairy off shelf for Australian product

China dairy consumers may be looking to Australia to secure its dairy supply, with reports supermarkets are taking US product off shelves.

Trade disruptions in Europe and the uncertainty over US tariffs may have China looking to Australia to secure its dairy supply.

Managing director Peter Verry of Peloris Global Sourcing, an export logistics company that connects Australian dairy producers with Chinese customers, said Chinese supermarkets were taking US dairy products off their shelves.

“Now I don’t know if that’s because they can’t get them, or they don’t want them, but they’re being removed and replaced. And it’s happening fairly quickly,” he said.

Peter Verry with a bottle of a2 Milk at an Ole supermarket in Shanghai. Picture: Supplied

Mr Verry said Peloris had increased its dairy exports to China “five-fold” on the past year, but the challenge for the company, and Australian producers more widely , was to manage the different expectations coming from Chinese customers.

“The Chinese customer wants instant supply and short lead times. So what we’re telling them is, ‘that’s fine’, but they’re going to have to commit to multi-year agreements,” he said.

“They can’t just come and demand it and then three months later say ‘I’m going back to America’.”

Dairy Australia analyst Madelyn Irvine said China’s domestic dairy production had decreased in the past year on the back of higher feed costs, leading to an increase in Australian exports.

“Last year we were 52 per cent down on the year before, but now it’s a lot better,” she said.

“In February we were 9 per cent up year on year, 2 per cent up in March, but then down 3 per cent again in April.”

However, with global trade data a “bit delayed”, Ms Irvine said it was too early to ascertain how tariffs may have changed China’s demand for US products, but that it was something they were monitoring closely.

Dairy Australia is forecasting a drop in Australia’s milk pool for next season, on the back of extreme weather events in the past six months, which could make it difficult for Australia to fill any potential increase in Chinese demand.

“Our position in the global market (last season) was pretty good, but as far as the season to come … our position is that production will not increase,” Ms Irvine said.