The GDT recorded its fourth consecutive decline since the beginning of 2016 after the benchmark dairy index lost almost 3% at this week’s auction in New Zealand. The average price of product sold fell by 2.8% to $2,235/t, while volumes traded remain low.

Whole milk powder (WMP) prices were back almost 4%, while skimmed milk powder (SMP) contracts were back more than 1%. Rennet casein prices were back the most after falling 12%, while there were also decreases in the average selling price for cheddar (-5.6%), butter (-2.3%) and butter milk powder (-1.2%).

Many analysts and commentators were surprised at the latest drop, as dairy futures had pointed towards a fall for the GDT in the region of 10%.

Futures contracts for WMP traded on the NZX derivatives market, the New Zealand-based futures exchange, had slumped by more than 12% over the last fortnight and were trading below $1,800/t.

WMP futures tend to be a decent proxy for the performance of upcoming GDT auctions, as WMP is the key commodity traded, accounting for more than half the product sold.

As such, it is interesting to note that WMP futures contracts have since jumped by almost 9% in the aftermath of this week’s GDT auction, which is a positive signal from the market.

New Zealand financial institutions are retaining a bearish outlook for the market after some of the country’s largest banks revised their milk price forecasts down further for the current season.

ASB Bank has cut its milk price forecast to $3.90/kg (15.9c/l), while ANZ Bank has cut its forecast to $3.95/kg (16c/l). Economists at Westpac, New Zealand’s second-largest bank, have trimmed their forecast price to $4/kg (16.3c/l).