Global dairy market fundamentals remain well balanced with lower global production helping bolster prices, according to Rabobank.
Global commodity prices had enjoyed a period of strength in September, the bank's senior analyst dairy Michael Harvey reported in the bank's October Australia Agribusiness Monthly
"The global market fundamentals remain well-balanced, but with several moving parts," Mr Harvey said.
The commodity price lift through September was due to a slowdown in milk production in key production regions and buoyant import purchasing from Asian buyers.
"A slow start to milk production in New Zealand could certainly help provide further price support in the near-term," Mr Harvey said.
"Northern hemisphere milk production is losing steam.
"In the United States, milk production expanded by 1.1 per cent in August, which was below the recent trendline.
"In Europe, milk production hit a snag in some key producing member states."
The EU-27 milk production was down 0.6pc in July.
Australia's milk production had also started the 2021/22 season sluggishly.
"Pasture production has been impacted by wetter-than-normal conditions through winter," Mr Harvey said.
"There is, however, still time for production to turnaround this season.
Meanwhile New Zealand farmers have been battling a prolonged wet winter and early spring.
In August 2021, milk production was down 4.8pc compared with the previous year while season-to-date milk production was down 2.4pc.
Mr Harvey said a key watch point for the Australian market was a weak Australian dollar.
"A weaker local currency against the US dollar has been welcome news for Australian dairy export returns so far this season," he said.
"Falling iron ore prices, on the back of Chinese steel production curbs, and COVID-19-related restrictions will keep the pressure on the currency in the weeks ahead."
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