Global dairy prices fell again at auction on Tuesday night with Global Dairy Trade prices crashing 5 per cent for the second consecutive auction.
The fall pushed the average price to $US3913 a tonne, the first time its fallen under $US4000 since October last year.
All commodities were down again - but in an encouraging sign for Australian producers, the cheddar index suffered the smallest drop, down just 0.7pc.
The key whole milk powder index was down 6.1pc to US$3544/t, a 30pc fall since March.
But forecasters are still upbeat about the prices this season, pointing to tight global supply.
They say the current fall has been driven by waning demand but expect that to rebound as the Chinese economy recovers.
Westpac NZ senior agri economist Nathan Penny said the global dairy production outlook was weak.
"In the three key dairy exporting regions - the European Union, the United States and New Zealand - we expect 2022 dairy production to fall compared to 2021," he said.
"The fact that all three regions are likely to post production falls is rare.
"Costs of production have spiked and this has been compounded by poor weather (hot and dry in the Northern Hemisphere and now too wet in the Southern Hemisphere).
"All up, very weak global production should support global dairy prices over the season."
NZ bank ASB Future Me graduate Chandna Bedi said prices also eased over winter last year and then moved higher, given extremely tight global milk supply.
"And we continue to think global dairy demand is likely to remain relatively inelastic, and keep prices well supported," she said.
"Likewise, we think global dairy supply will remain extremely constrained."
"Indeed, Chinese consumer spending growth is already on a firm footing, and as that continues to strengthen, we expect that it will lead to a recovery in dairy demand over the coming months," he said.
Any sign of recovery in the market is likely to become more apparent from this month with GDT trialling a new auction to be held on alternate weeks to the GDT trading events.
The GDT Pulse will offer one product - the Fonterra whole milk powder regular contract period 2.
The first one will be held on August 9.
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Carlene Dowie
Carlene Dowie is the editor of the Australian Dairyfarmer magazine and has more than 30 years' experience as a rural journalist.
Carlene Dowie is the editor of the Australian Dairyfarmer magazine and has more than 30 years' experience as a rural journalist.
