The Year of the Goat is far from lucky for China's herders and dairy producers who try to cut losses as too much supply in the world market sent prices of milk falling to their lowest in six years.

Chinese dairy farmers have been getting rid of excess in milk and cows as a spike in the demand for their products has turned into a crash over the last three years.

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One farmer reports a loss of 100,000 yuan a month, despite culling a fifth of his herd - 180 cows - in past weeks and as China's Lunar New Year starts, he may have to kill more to survive the glut.

Tough times for dairy producers has spread beyond China, as farmers from Australia, New Zealand and the U.S.  also prepare for cutthroat competition, dropping income and smaller herds this year.

The dairy industry's woe goes to show how China's huge economy of scale affects world commodities. Three years ago, China's big demand for cheese, baby formula and milk prompted suppliers from New Zealand to the U.S. to invest heavily in cows.

Analysts said the gross miscalculation in dairy demand toward the end of 2013 was a result of a bet that China's domestic milk supply was going to remain very tight.

The trouble started in 2008, when contaminated milk in China killed six children and sickened thousands. China's government responded by putting the dairy industry under inspection. In 2009 and 2010, regulators started raising quality standards, which led to the shutdown of some small farms in a crackdown that continues today.

Although milk demand in China was rising, dairy production was not. In 2013, another safety scare led to the closing of more farms. Local milk production was down 6 per cent from 2012.

Suppliers in the U.S. and New Zealand filled the demand. China's dairy imports from New Zealand, which makes up 80 per cent of all supply from abroad, jumped 47 percent. The remaining milk imports were from Europe and Australia.

Investors and farmers counted on strong demand.  But, as milk prices spiked to record levels in the middle of 2013, China's small dairy farmers began to re-enter the market and grow. China's milk production rose 5 per cent to 36 million tons in 2014 from 2013, which contributed to the oversupply.