How China’s dairy transformation is hitting Australian farmers

Australian dairy was raking in the export cash only five years ago. But an industry analyst says expansive changes are eating into profit margins. See the video.

Colossal gains by China’s increasingly self-sufficient dairy industry is already undercutting Australian dairy’s financial fortunes, an industry analyst says.

Long seen as a major importer of milk from Australia and other western nations, China has now cemented itself as the world’s third-largest producer of milk.

Speaking at Dairy Australia’s situation and outlook function on Friday, DairyTrade Australia managing director Andy Williams warned China’s growth in dairy meant many markets were scrambling to sell their milk elsewhere.

He told the annual gathering that Australia was not alone in seeking new markets to replace the once-receptive Chinese market.

“Since 2019 to 2023, 10 billion litres of milk has been created in China in four years,” Mr Williams said.

“Australia is at 8.3 billion litres (total milk pool for this financial year). So just in China’s increase, the 120 per cent of our overall production.

“So that is having, and going to have, a big impact on global trade right now.”

During the 2020-21 coronavirus years, most commodities on the Global Dairy Trade index surged as China stockpiled milk powder.

But the market started to soften in 2022 before dropping precipitously last year, with New Zealand seeking new markets for its produce, particularly Australia.

ABS data showed New Zealand butter shipments to Australia rose 62 per cent in the 12 months to the end of June 2023; milk spiked by 74 per cent; and ice cream imports rose an extraordinary 105 per cent in the 2022/23 financial year.

“Our friends across the ditch are taking some pretty big steps recently but (New Zealand) knows what’s happening, they know what’s coming,” Mr Williams said.

“They doubt their whole milk powder export (levels) seen in recent times is coming back, they think it’s over.

“At the peak in 2021, there was 850,000 tonnes of Kiwi whole milk powder go to China.

“Last year, it was a smidge under 400,000 tonnes. That’s 400,000 tonnes of whole milk powder or milk powder that’s not going there and through the ripple effect, will find it’s way elsewhere.”

Dairy Australia industry analyst Eliza Redfern told the function that Australia’s milk pool will clock in at 8.35 billion litres at the end of the financial year on June 30.

She said it was higher than anticipated due to high farmgate prices among other factors.