New Zealand dairy farmers struggle to cope with changes in Chinese demand

As Chinese grew wealthier while their economy raced ahead, dairy farmers more than 9,000km away in verdant New Zealand felt like they'd won the lottery.

They were getting record prices for their milk and it seemed there was no slaking China's thirst for premium New Zealand infant formula, especially after a tainted milk powder scandal made Chinese shoppers wary of local brands.

Now, it's as if farmers have discovered the lottery ticket wasn't valid. A world milk glut and a decline in Chinese demand for imported dairy products have sent prices down by 50 per cent. Many farmers are borrowing to stay afloat and rural suicides have increased.

Dairy exports in the year to the end of June totalled NZ$12 billion (HK$59.1 billion), down from nearly NZ$16 billion a year earlier. Dairy trade to China has proved particularly volatile, rising from NZ$2.8 billion in 2013 to NZ$6 billion last year, then plunging to NZ$2.3 billion this year.

"We saw it happening on the cash-flows way back in April, May, and could see well ahead that there was going to be just massive deficits," said Chris Engel, a farmer with 400 cows in Wairarapa.

Engel, who has been farming with his wife Jude for more than three decades, said there have been droughts and other challenges in the past but never such bleak pay days. "We just had to be in constant contact with the bank, updating them regularly, to get their support to pay the bills."