NEW Zealand may not able to fill the future milk requirements for China.
Ther is room for another country to step into the important trade flow, according to an analyst.
Rabobank director of dairy research New Zealand and Asia Hayley Moynihan told farmers across Victoria last week Australia could help fill supply gaps in China's dairy consumption.
Ms Moynihan said the cost of milk production in China was high due to the reliance of imported feed and there were also concerns about food safety after melamine was found in dairy products in 2008.
"Imported volumes have increased five-fold since melamine," she said.
New Zealand dominates the Chinese whole milk powder import market with 86 per cent of the volume, while Australia contributes 3 per cent.
Last year China imported 580,000 tonnes of whole milk powder and 378,380 tonne of whey.
"The (New Zealands) free trade agreement was negotiated in 2006-07 and it came into affect in 2008, it was negotiated when China imported less than a fifth of what it imports now," Ms Moynihan said.
She said about 100,000 tonnes of product was sold into China from New Zealand tariff-free out of 400,000-500,000 tonnes.
"In January (New Zealand) hit the tariff ceiling, the other 11 months of the year it is competing with everyone else," Ms Moynihan said.
She said New Zealand was no longer a cheap source of milk and in some cases it was more expensive than Australia.
Less milk growth was expected out of New Zealand into the future as it became harder to increase production per cow and maintain a low cost base, she said.
Meanwhile Chinese consumption continues to grow and it's where Australia can help make up the supply deficit.
Rabobank Australian dairy sector analyst Michael Harvey said global milk supply would remain tight for six months, but as globally farmers recover from poor seasons and low prices, a supply response would be triggered.
There's also potential for relief in feed costs later in the year, he said.