Dairy prices are tipped to finally rise at this week's GlobalDairyTrade auction as the market responds to lower volumes.
Markets had begun to bid prices higher on the likelihood that New Zealand production would fall this season.
Fonterra was also reducing the forecast whole milk powder volume on offer at the auction by a third.
The risk was that Chinese currency devaluations and associated market uncertainty spilled over to dairy markets, ASB rural economist Nathan Penny said.
If that happened, it would ''put a spanner in the works'' of the long-awaited lift in dairy auction prices.
There have been 10 consecutive falls, with GDT at its lowest level since 2002.
ASB expected New Zealand production this season to be on a par with last season, if not fall, while Fonterra has factored in a 2% fall.
Given the drop in global dairy prices, it should not be unexpected that suggestions would arise that European Union production quotas should be reimposed, Prof William Bailey, of the department of agriculture at Western Illinois University, said.
Quotas were scrapped at the end of March, after being imposed for more than three decades, with European producers now free to produce as much as they liked.
At least one Spanish dairy executive had reportedly called for a return of quotas, although EU milk production was up less than 1% from last year's level when quotas were still in place, Prof Bailey said.
While some sectors of European agriculture had managed to adjust to Russian trade bans, the dairy sector had not been as fortunate.
Exports were down 10% from levels previously seen, adding downward pressure on dairy product prices.
