The tightrope between supply and demand has led to inflated prices on the dairy cattle export market leading to the industry’s newest player calling for market caution.
Frontier International Agri general manager Hamish Browning said market volatility needed to be approached cautiously by the Australian industry to maintain lucrative partnerships between China and Australia.
«The Chinese market is important to Australia and important we are able to develop export programs that are sustainable in volume and price,» Mr Browning said.
«I think the biggest danger for Australian exports to China for dairy cattle is the volatility of both price and volume swings which we have seen in the last 18 months.»
He said with the current high prices being paid for Australian dairy cattle, a more stable volume and price into China was desired and as a result would be sustainable.
«It is a difficult thing to regulate and achieve. You’re seeing a market respond to supply and demand forces which is natural,» Mr Browning said.
«But I feel from the Chinese perspective, at the end of the day we are trying to serve customers and markets and keep them happy so I think if we can find pricing levels that are more sustainable, it is good news for everyone.
«That way you can start to plan and look further down the road into the future.»
The comments follow Frontier International Agri’s first shipment of 1200 crossbred and Holstein dairy heifers, 300 kilograms-plus, left Portland bound for China on the weekend.
It is the first dairy shipment in Frontier’s livestock export trading program’s young career that was established by Ruralco Holdings Ltd in December 2013.
While Mr Browning would not comment on the prices of the shipment, it has been reported similar contracts to China were paying over $1100 per head.
The Australian market continues to explode into China with Dairy Australia (DA) reporting a continuing boon due to Chinese milk production tracking 20 per cent below recent years, with intensive international purchasing activity over the past few months confirming the shortfall.
«We have certainly seen firm volumes and very firm rates in the last six months with the demand strong,» Mr Browning said.
«Prices are higher than they were 12 months ago and there is more cattle flowing into China than 12 months ago.
«If it is at sustainable pricing volumes, the customers in China would like (the Australian contracts) to continue and for some time.»
The country’s shortfall is still due to a melamine-tainted formula that rocked the nation’s dairy industry in 2008.
Dairy companies have been forced to adopt stricter inspection measures when collecting raw milk and have seen a move from small, village serving dairies to large commercial size dairies in a bid to ensure they get a safe and stable milk supply.
However, this transition has come at a production expense with the Dairy Association of China reporting a significant drop of 5.7pc to 35.3 million tonnes last year.
Other factors included spiralling feed costs and hot conditions that have depressed cow milk yields, according to DA.
One of the country’s major corporate dairy is Mengniu Dairy which has eight large ranches in Inner Mongolia, Gansu, Hebei and Shandong provinces.
During the past two years, it has reportedly imported 14,000 cows from Australia and New Zealand as it aims to produce 100pc of its milk processing volume.