New Directions for Dairy Heifer Exports: Navigating Uncertain Markets

However, this market is now facing new challenges, with Chinese demand weakening due to an oversupply of domestic raw milk and growing trade risks tied to Australia’s live export policies, according to a recent Rabobank industry report.

In the report titled New Directions for Oceania Live Dairy Cattle Exports in a Slower Market, Rabobank outlines how bearish conditions in China's farm sector—traditionally an irreplaceable market—are leading to a slowdown in trade for the foreseeable future.

RaboResearch senior dairy analyst Michael Harvey, the report's author, noted that from 2013 to 2023, the export of dairy heifers to China offered substantial income diversification for dairy farmers in both Australia and New Zealand. This was especially true as China ramped up its domestic milk production through an industry revitalization strategy implemented in 2018, which spurred significant farm expansion and herd building.

“The recent boom in Chinese import demand and the subsequent rise in prices were driven by China’s wide-ranging efforts to revitalize its dairy industry,” Harvey said. However, by 2024, export volumes had significantly slowed, with Australia and New Zealand peaking at 233,000 head of dairy heifers combined in 2022.

China’s domestic milk supply has now reached a pivotal juncture. The sector is dealing with an oversupply of raw milk, which has led to falling milk prices and reduced profitability for local farms, key factors impacting the demand for imported dairy heifers.

Potential for Recovery in Chinese Demand
Looking forward, the Rabobank report suggests that a recovery in Chinese heifer demand is possible, though it would depend on an improvement in local milk prices, increased farm profitability, and further government policy support for farm expansion.

For Australian dairy farmers involved in the live export of dairy heifers, this slowdown in trade may necessitate a strategic reassessment of breeding programs and business goals. “In this era of sluggish trade, dairy farm businesses must reconsider their long-term strategies,” Harvey said.

Exploring Other Export Markets
While China has traditionally accounted for over 80% of dairy heifer exports from Australia and New Zealand, Rabobank’s report identifies potential opportunities in emerging markets across South-East Asia. Countries such as Singapore, Malaysia, Thailand, Indonesia, Vietnam, and the Philippines collectively represent a region with a significant milk deficit, with self-sufficiency rates as low as 1% in some cases.

In 2023, the combined import deficit for liquid milk across these South-East Asian markets exceeded 10 billion litres, according to RaboResearch modelling. Increased local investment in herd expansion and milk supply growth has opened up some demand for live dairy heifers, providing a small but steady export flow into the region.

However, the report emphasizes that South-East Asia, while offering growth opportunities, cannot replace China in terms of volume. Historically, annual heifer exports to South-East Asia have never exceeded 25,000 head, far less than the peak numbers seen with China.

Policy Considerations in Australia
In addition to shifting market dynamics, Australia’s live export policies add another layer of uncertainty for the dairy heifer export trade. Although there have been no changes to the policy regarding live exports of dairy cattle, the Federal Government’s decision in May 2024 to end the live export of sheep by sea from Australia by 2028 raises concerns about future restrictions on the dairy sector.

“While dairy cattle exports remain unaffected for now, the broader policy landscape surrounding live exports is something the industry needs to monitor closely,” Harvey said.

As Australia’s dairy sector navigates these new challenges, adapting to shifting demand and policy changes will be critical for sustaining long-term profitability in the live heifer export market.