The lack of Chinese demand is a big unknown for the dairy sector, an analyst says. Photo: 123rf
Global dairy prices have resumed their losing streak in the global dairy auction overnight.
The average price at the fortnightly sale fell 3.5 percent to US$3911 ($NZ6830) a tonne, after rising 2 percent in the previous auction.
Prices have generally been falling since hitting a record high in March.
"A significant lack of demand arriving at this auction has resulted in a red screen of price declines," NZX dairy analyst Alex Winning said.
"Demand to supply ratios at this auction were almost half of what arrived at the previous auction."
The amount of product on offer was up on previous auctions, which Winning said was a factor in the weaker prices, as was the weak demand coming from Chinese buyers.
"The lack of Chinese demand remains the big unknown for the wider dairy market, everyone on the sell side is still waiting with bated breath for the Chinese buyers to rally the market higher.
"Conversely, everyone else on the buy side of the market is most likely relieved to not be competing with strong Chinese demand while prices for everything else are climbing, not to mention the significant impact that exchange rate fluctuations are having on buying power."
The price of wholemilk powder, which strongly influences the payouts for local farmers, fell 4 percent to US$3573 a tonne.
Prices for other products fell sharply also, butter was down 7 percent, milk powder down 4.4 percent, and cheddar down 3.8 percent.
Winning said it was possible that the weakness in prices mirrored the wider macro-economic environment.
"It is tough on the ground for consumers and the tail wind of steady demand from consumers is likely to be fading. This auction has roughly reset the market back to the price point found at the end of August 2022, but where to from here is the biggest question of all."
Dairy giant Fonterra, a major supplier to the auctions, has trimmed its forecast payout for the current season, but also reported a 5 percent drop in local milk collection in August.