The Global Dairy Trade price index continues to spiral down with a 3.9 per cent fall in Tuesday night's auction.
This follows large falls in the previous two auctions.
Plummeting Chinese demand is behind the market weakness, as ongoing COVID-19 restrictions stifle economic activity.
But results varied widely in the November 1 event.
Butter milk powder was down a whopping 11.4pc, closely followed by skim milk powder, which was down 8.5pc.
Whole milk powder (down 3.4pc), anhydrous milk fat (down 1.7pc) and lactose (down 1pc) recorded more modest falls.
In good news for Australian processors, Australia's major export category, cheddar, was up 0.9pc, while butter was up 0.2pc.
But the continued fall in demand has surprised analysts.
They are now forecasting the market to continue to be weaker into next year before rebounding.
"Global dairy demand has weakened more than previously expected, and we expect this dynamic to persist into the new year," Westpac NZ senior agri economist Nathan Penny.
Global prices had been under pressure for time.
"Over the past three dairy auctions, overall prices have slid by 11.5pc," Mr Penny said.
"And over the past year, prices have slipped by over 18pc.
"These recent falls are both larger and have continued for longer than we anticipated.
"We had expected prices to have stabilised by now, if not started to show signs of a rebound."
On the back of the prolonged weakness, the bank has downgraded its forecast 2022/23 NZ farmgate milk price.
Slowing Chinese economy hits prices
Mr Penny said the weakness in demand was due to conditions in China.
"COVID and the associated restrictions continue to batter the Chinese economy," he said.
"We expect just 3pc annual economic growth over 2022.
"That's significantly down on the official growth target of 5.5pc and 2021's growth rate of 8.1pc."
Mr Penny said although other markets in Asia were picking up some of the slack, this was at lower prices than the Chinese had been paying.
He said he expected prices to bottom out in February as Chinese economic growth accelerated.
"We expect that as COVID restrictions are eventually eased, Chinese consumer demand, including for dairy, will quickly return," he said.
Global dairy supply outlook weak
The global dairy supply outlook remains weak, particularly in the large export regions, which should support higher prices.
Mr Penny said NZ dairy production was now forecast to fall 1.5pc this season compared with last season.
"A wet and cold winter and spring to date over many parts of the country have seen production running 4pc behind the same stage last season," he said.
"Similarly, production remains weak in the European Union and to a lesser degree in the United States."
ASB economist Nat Keall said the negative supply news out of NZ did not seem to be concerning buyers.
"Demand concerns are dominating sentiment now," he said.
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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.
