Prices crash as Chinese export dairy heifer market slumps

The crash will put pressure on Australian dairy farmers, mostly in Victoria, who have set up their businesses to take advantage of the market.

The Chinese live export market was facing tough times on the back of a general economic downturn, South Eastern Australian Livestock Exporters Association chair Jim Teasdale said.

"There have been stock sitting in quarantine that have been struggling to find homes," he said.

Exporters were unable to find buyers in what had traditionally been a high-value market.

"For the year, (the trade) is down about 50 per cent," he said.

Prices were also down, as the Chinese importers struggling to sell stock tried to meet the market.

Chinese buyers were increasingly under pressure due to the economic downturn and lack of finance.

Dairy Livestock Services general manager Scott Lord said prices Australian dairy farmers were receiving for export heifers had fallen to $950 a head delivered quarantine, down from an average $1800-$2200 and peak of $2650.

Demand had dried up since January with only three small export orders, compared with a monthly orders at the height of the trade.

All orders were quickly filled, leaving a surplus of unjoined heifers in the market.

Mr Teasdale said increased cost and unavailability of shipping, as Indonesian exporters fired up, was putting additional pressure on exporters.

Exporters expected the market to remain tough for at least the rest of this year.

"Last year, they had shipment after shipment, but now there might be a gap of a couple of months before they can negotiate the next one," Mr Teasdale said.

The heifer export trade to China has boomed in recent years.

According to Dairy Australia's In Focus 2023, more than 100,000 head were exported in 2022-23, up 250 per cent on 2016-17.

China took about 90pc of the heifer export market.

"Increased volatility in farm cash incomes has seen many farmers participate in the export heifer trade or sell dairy cows for slaughter as an additional source of farm income," it said.

Dairy Farmers of Victoria president Mark Billing said the crash would have a significant impact on cashflows on some farms.

Farmers had been increasingly using sexed semen to reduce the number of calves going into the bobby calf market, but would now have excess heifers.

"Driving around the district, there are a lot of black-and-white animals about," he said.

"Heifers that were bred specifically for the export market are still in the system."

Farmers would now need to make a choice about what to do with those excess heifers.

Some might join them to bring back into the herd to get a return, but that was a two-year turnaround and it would not alleviate short-term cashflow challenges.

In south-western Victoria ongoing dry conditions were putting pressure on available feed, which would make it more difficult for farmers to retain heifers.

Mr Billing said the crash of the market exposed the Australian dairy industry's reliance on China - not just for the heifer market but for dairy product exports.

"China aren't taking a lot of our heifers and they are not taking as much of our dairy products as we'd like either," he said.

"We need to look at alternatives.

"China will always be there, their population is not shrinking, but the fact their economy is stuffed is putting pressure back on to us."

Dairy Australia industry analyst Isabel Dando said the weight of China's weakening economy had been felt through global demand for dairy.

The Chinese economy had turned deflationary.

"Demand for both local and imported dairy across China has been lacklustre, and ongoing consequences of strict COVID-19 control measures and increased regulation on private enterprise continue to emerge, creating economic headwinds on several fronts," she said.

"Local milk production has strengthened in recent years, exacerbating low importing demand.

"Over this time, milk production has grown in line with incentives and policies from the Chinese government to build a domestic dairy industry and ensure food security into the future."

But Chinese dairy farms are struggling.

Chinese financial news group Yicai Media Group reported in February most Chinese raw milk producers had losses in 2023 because of a supply glut in the industry.

It said Chinese dairy producers would continue to face operating pressures in the short term as the oversupply problem continued, even though the number of domestic cows declined by about one million in 2023.