SMALL dairy farmers in China are dumping milk and selling cows as demand from processors slows in a sharp turnaround from last year, when a scramble for supplies prompted a huge surge in milk powder imports.

    Slower growth in milk product consumption, higher yields from modern dairy farms and the excess stocks of imported powders have combined to reduce demand for fresh milk in what has been one of the world’s fastest-growing dairy markets.

    Small farmers — many with fewer than 100 cows — in Shandong, Qinghai and Hebei provinces are pouring milk down drains, according to local media reports, while others are feeding surplus milk to pigs.

    The agriculture ministry said in a circular Thursday that all efforts should be made to avoid milk being destroyed, calling on provincial governments to offer subsidies for the storage of milk.

    A scandal over tainted milk in 2008 and years of short supply of quality milk have pushed up prices in China to among the world’s highest, fuelling a massive expansion of the sector and rush of capital into the market.

    But high prices last year choked off some consumption, and the anti-corruption campaign may also have dented sales of dairy-based gifts, said Sandy Chen, analyst at Rabobank.

    Processors have slashed prices more than a tenth from an average 4.27 yuan (US$0.69) per kilogram in February 2014 to around 3.75 yuan at the end of December.

    For small farmers, who account for about half of the market, prices are as low as 2 yuan per kilogram.

    The larger players are also struggling to sell any surplus fresh milk not already contracted to processors, said a manager at a 10,000-head dairy farm who declined to be identified.

    “There was massive demand Imports of milk powder rose 62 percent from January to August 2014 compared with the same months of the previous year, partly due to worries about supply because of an outbreak of foot-and-mouth disease in 2013.(SD-Agencies)