In a statement, RaboResearch senior dairy analyst Michael Harvey said the live export of dairy heifers to China had been a lucrative market for New Zealand farmers across much of the last decade.
His report New Directions for Oceania Live Dairy Cattle Exports in a Slower Market said the future prospects for the sector were far less certain following a government ban on live animal exports by sea in April last year and waning Chinese demand for dairy heifers.
A change of government has prompted discussions of a possible shift in policy, he said.
"Potential changes surrounding a restart in live exports via sea could include ‘gold standard’ rules for animal welfare, along with purpose-built ships."
He expected public consultation on the possible reinstatement of livestock export by sea to start by the end of this year.
"The topic has historically been divisive among the farming community, so uncertainty prevails in the short-term as to whether trade will be reinstated."
Mr Harvey said the broader policy environment around live exports in Australia was also far from clear.
There has been no shift in policy on the live exports of dairy cattle, but the federal government had announced the export of live sheep by sea from Australia would end from May 2028.
Should the New Zealand trade of live animal exports be reinstated, exporters would likely encounter a markedly slower market.
Oceania live dairy cattle trade volumes peaked at 233,000 in 2022.
A combined total of 815,000 dairy cows were exported from Australia and New Zealand between 2018 and 2023.
"However, by mid-2024, the flow of dairy heifers from Australia and New Zealand to China has slowed to barely a trickle. The slowdown began in 2023, due to a combination of New Zealand’s ban on exports along with a slowdown in Chinese demand, resulting in an annual decline of 83%.
"Unsurprisingly, the drop in trade with China has taken a heavy toll on indicative pricing in the market for live dairy cattle exports."
Australian export data showed the indicative Australian export FOB (free on board) price per dairy cow peaked at nearly $4900 in 2022 and fell to half of that per head the following year."
Mr Harvey said the growth journey of China’s milk supply, which was a key driver of increased heifer exports, was at a critical juncture.
"The industry is grappling with an oversupply of raw milk, leading to falling local milk prices and lower farm profitability.
"Moving forward, a recovery in Chinese heifer demand is possible. However, it will require a combination of improved milk prices, increased farm profitability, and further government policy to support farm expansion and herd rebuilding.
"Bearish farm sector fundamentals in China, a market that is irreplaceable, point to slower live export trade for the foreseeable future."
