The Global Dairy Trade index has fallen 0.7 per cent as the whole milk powder price recovery falters.
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The index was dragged down by a 2.7pc decline in the WMP price at auction on November 7.
But most other dairy commodities pegged gains.
Lactose bounced 19.2pc, while cheddar was up 4.5pc and butter milk powder 3.5pc.
Anhydrous milk fat also recorded a gain, up 3.1pc, as did skim milk powder, up 2.3pc.
The only other category to record a fall was butter, which was down 1.6pc.
The fall in the price index follows four consecutive gains that had arrested a sharp slide in prices in the middle of the year.
New Zealand production lifts
Analysts pointed to better-than-expected New Zealand milk production data for the latest fall.
ASB economist Nat Keall said with global dairy consumption still looking unspectacular, expectations around tighter dairy supply were the key driver for prices.
"A stronger patch of NZ production figures in September may have helped alleviate some of those concerns, though the upward kink in the WMP contract curve implies that buyers are still keen to ensure continuity of supply further into the season," he said.
"Given projected El Nino conditions in NZ and the pressures on farmgate margins, NZ dairy production can still underperform during its peak production months."
Westpac NZ senior agri-economist Nathan Penny said New Zealand spring production had started on a firm note.
September production was up 1.3pc compared with September 2022.
"Dairy markets previously had been factoring in drought risk on the back of the El Nino weather pattern," he said.
"In our view, this has been overdone as New Zealand water tables are generally very high and most farmers have ample feed on hand.
"This will help mitigate or dampen any drought impact.
"Moreover, we expect ongoing firm production in annual change terms over the remainder of spring."
Cautious outlook for farmgate price
Mr Penny said Westpac remained cautious but still supported its forecast NZ farmgate milk price of $NZ7.25 a kilogram milk solids.
"Chinese demand is hinting at a pickup," he said.
"Recent economic data have been more positive than expected so this may translate into higher demand over time."
Mr Keall said ASB was also retaining its forecast at $NZ7.35/kg MS.
Although WMP was the most important driver of the NZ farmgate milk price calculation, stronger revenue from other product streams would help bolster the milk price.
ASB still saw some limits to how far prices could recover as long as the global economy looks precarious.
"China's economic outlook is no longer deteriorating, and recent falls in bond yields have been reflective of hopes that the world's central banks will get inflation under control without triggering a sharp downturn," he said.
"Nonetheless, economic growth among major dairy importers is still set to be anaemic as the season draws to a close - with the outlook considerably below average in the case of China.
"This is not a recipe for strong global dairy consumption.
"China's share of WMP purchases rose modestly at this auction, but only marginally so, and it remains far from as active as it was during the past few seasons."
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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.
