Global dairy prices have failed to rally in response to the reopening of the Chinese economy after last year's removal of COVID-19 restrictions.
Prices fell marginally at Tuesday night's Global Dairy Trade auction, the second consecutive fall.
The GDT price index fell 0.7pc - baffling some pundits who were expecting to see signs of recovery.
Westpac New Zealand senior agri economist Nathan Penny said in essence, global dairy prices had been treading water so far in 2023.
Overall prices had fallen 2pc since the start of the year, while prices for the auction's key commodity - whole milk powder - had increased by just 0.7pc.
"We expect global dairy prices to rise over coming months as the Chinese economic recovery gains further momentum," Mr Penny said.
"However, for now, dairy buyers appear in no rush to bid prices higher."
ASB economist Nathaniel Keall said China had made a modest return to global dairy markets.
Its proportion of purchases in the past two auctions was hovering around 60pc - its highest since February 2022.
"But that's set against softer demand from other regions, with Southeast Asia purchasing its lowest volumes since mid-2021," he said.
At Tuesday's auction, cheddar prices plummet 10.2pc, while anhydrous milk fat (down 1.8pc), skim milk powder (down 1.1pc), butter (down 0.3pc) and lactose (down 0.3pc) also fell.
Only lactose (up 0.3pc) and whole milk powder (up 0.2pc) defied the trend.
Mr Penny said one explanation could be an overhang of stocks.
"If this is the case, then prices should still pick up over time as the demand lift will eventually lead to a rundown in these stocks," he said.
"Nonetheless, we had anticipated that prices would be showing clearer signs of lifting by this stage of the season."
Mr Penny said the failure of the market to rally could impact this season's final price for NZ farmers.
But he was still bullish about the price for 2023/24 - standing by the bank's forecast of $NZ10 a kilogram milk solids.
Mr Keall and ASB are significantly less upbeat - forecasting $NZ7/kg MS for 2023/24.
"We add the usual caveats that its extremely early and the margin of error is huge this far out," he said.
His analysis was based on easing global demand but growing supply.
Global economic growth was projected to slow over the course of the year, with the recovery in China set to be offset by a deceleration elsewhere.
"On the supply-side, global dairy supply continues to mount a modest comeback," 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.
