Dairy prices have fallen to the lowest level since August 2016, and economists say there could be more price weakness.
At the GlobalDairyTrade auction this week, total prices fell by 2%. Prices have now fallen to 10 out of the last 11 auctions and have fallen by 17.6% during this period.
The result was weaker than expected. Bidding ahead of the auction showed a rise of about 2% in full milk powder but fell by 2.9%, said ASB senior farm economist Nathan Penny.
& # 39; We had thought that this year's pricing was an optimistic one, but prices were even weaker than our expectations for no change.
Inadequately, production of dairy products in New Zealand recorded in October the "highest month" for the country's production.
If the forecasts prove to be correct, extra milk will exert further downward pressure on dairy prices, he said.
ASB has recently revised its forecast for a 2018-19 increase from 2% to 4%, but may be even higher.
However, there was an increasing chance of a El Nino weather model this summer and the associated drought could affect production later in the season.
Top economist Westpac Anne Boniface said the further softness of the auction had the bank's concern about the dangers of reducing its milk prediction by $ 6.25. Auction prices will now have to increase significantly in 2019 to make this price possible.
Yesterday, the New Zealand Dairy Products Association (DCANZ) said the revision of the China-New Zealand FTA is unlikely to lead to an improvement for New Zealand's dairy industry.
The importance of high quality and timely improvement of access to dairy products has increased since the other trade negotiations in progress.
"Despite the close relationship between New Zealand and China, exports of dairy products to New Zealand in China continue to cost more than $ 100 million each year, with safeguards being made regularly in early January.
In addition, New Zealand exporters of powdered milk, cheese and butter will be in a growing tariff disadvantage compared to Australian competitors until such safeguards end in 3-5 years, "said DCANZ Chairman Malcolm Bailey.
DCANZ has agreed with the assessment New Zealand will have the best access to China in any country in the world when the dairy safeguards will end in 2024. However, five years would be a long time for New Zealand's dairy exporters to rely on at tariff rates commercial disadvantage.
It was therefore important for New Zealand to promote improvements in quality and timely access to other markets.