BABY milk formula producers Bellamy and A2 Milk Company deny their use of Chinese "dai guo" distribution networks is responsible for a shortfall of milk powder stock in Australia.
Supermarkets such as Woolworths and Coles have been out of stock since Wednesday because Chinese buyers bought thousands of tins of milk powder on the biggest shopping day for China.
Bellamy and A2 Milk Company have set aside milk powder for the Chinese market using dai gous - Chinese resellers or buyers who buy milk for their friends and family in China.
Many dai gou distributors run profitable businesses selling milk for between $40 and $100 a tin. A standard tin of formula in Australia is about $17 to $24.
"The manufacturer's representatives go to dai guos offering them stock to sell," distributor Fizzero Wellness' Jessica Chang said. "And in some retail stores, some store managers collude with dai guos to give them stock before they go on shelves."
The dai-guo network is extensive and involves thousands of individuals and businesses.
"Don't blame the dai gous or the end buyers," Jingwen Xu, who runs a small dai guo business, said.
"Most dai gous are business owners and not trying to snatch milk from locals. They are also supplying to people who also have children and want milk. If producers want locals to get milk, they should set it aside for them."
Bellamy said baby formula had not been diverted to China in preference to Australia.
"The current supply situation of infant formula in stores in Australia has led to speculation as to the reasons this has occurred and we wish to correct some misconceptions that have been raised with us," chief executive Laura McBain said.
"Eighty-five per cent of our net revenues have come from Australia."
Ms McBain said the company had increased production but it was difficult to meet the "unprecedented demand". The company has talked with retailers to solve in-store availability through purchase limits.
Retailers and politicians are divided over whether the shortage is a supply or retail problem.
Liberal senator Richard Colbeck said the shortage of milk formula is a retail issue, not a supply problem. Agriculture Minister Barnaby Joyce identified a need to increase supply.
On Thursday, A2 Milk Company's chief executive Peter Nathan said supermarkets were not restocking their shelves quickly enough.
In a statement on Friday, he said "the company had struggled to keep up with a rapid growth in consumer demand".
He said the company wants to ensure a steady supply to Australian mothers but the company needs longer lead times than most competitors because it rears cows that produce only A2 protein.
Chinese buyers said if Australia and China co-operated and invested in larger production facilities both countries would benefit.
"If both countries build more factories in Australia, this is good for the economy because there is demand from China," buyer Jessie Luo said.
"We're so scared in China. When babies drink Chinese milk they get sick, when they drink Australian milk, their hair is glossy and they are so healthy."
