Chinese dairy farmers are tipping milk on the ground, culling their animals and even closing down because of a milk glut and falling prices, according to media reports.
A milk poisoning scandal in China in 2008 that killed six children and left 300,000 seriously ill, and other smaller food scandals that followed sent demand for safe milk and infant formula up so strong over the last few years that it caused shortages in other countries and encouraged an illegal trade across the Chinese border.
But now a drop in consumer demand in China and rising milk imports from countries like New Zealand and Australia are being blamed for an oversupply in China, the Australia Broadcasting Corporation online newspaper reported on Wednesday.
New Zealand dairy exports to China increased tenfold since a free trade deal was signed in 2008, hitting more than A$5 billion in 2014. Australian dairy exports to China were worth A$450 million in 2013.
Milk prices fell for ten consecutive months starting in February 2014, state-run Xinhua news agency reported. In the first three quarters of last year, they dived to 3.84 yuan per kilogramme from 4.26 yuan per kg, and the trend showed no signs of stopping in the last three months of 2014.
Slumping milk prices have pushed many domestic dairy farmers to desperation.
Jin Niu Dairy farm used to have over 500 cows, and now it is closing down, so did five other farms in Yuanshi county in Hebei province, CCTV.com reported on Wednesday.
Similar cases have spread to other major milk-producing areas in China, including in Shandong province and Inner Mongolia.
The dairy sector downturn has come as a surprise to many. In late 2013, China's dairy products saw a price hike following a production decrease caused by disease and farmers leaving the industry.
Milk prices jumped to more than 5 yuan per kg in December 2013 from 3.4 yuan per kg a year earlier.
The price boom saw Chinese dairy farms expand rapidly, with farmers purchasing large numbers of dairy cows at high prices to boost production. Junlebao in Hebei Province, for example, saw its supply double in 2014, said CCTV
In March 2014, however, foreign milk prices began to fall drastically due to overproduction.
Chinese dairy farmers are also being priced out of the market. The price of a ton of domestically-produced milk powder is nearly forty thousand yuan, but imported milk powder is only half the price, said CCTV.
The growing supply of imported milk forced local dairy companies to give up their domestic suppliers to reduce costs, it said. In 2014, one third of raw milk for domestic consumption was imported, said CCTV.