Dairy prices have reached their lowest point since 2009 with yet another fall in GlobalDairyTrade auction prices.
New Zealand First leader Winston Peters has described the situation as an ''emerging crisis'' in primary production returns and predicted Fonterra's current $4.50 forecast milk price would ''go down much further''.
A ''generation'' of farmers was at risk the longer the price slide continued, Mr Peters said yesterday.
There was a 3.5% fall in this week's GDT index with prices down across the board, apart from cheddar which lifted 9.1%.
Whole milk powder registered its smallest decline in two months, down 1.8%, while skim milk powder prices fell substantially for the fourth consecutive auction, down 7.5%.
AgriHQ dairy analyst Susan Kilsby said the increase in the number of companies buying product via the GDT platform indicated demand was beginning to improve, but that increase was not yet being reflected in prices.
''It's a buyer's market for skim milk powder at present with strong competition between New Zealand and European suppliers who are operating in the Asian and Middle East markets,'' Ms Kilsby said.
''A better-than-expected end to the 2014-15 milk production season means New Zealand dairy companies still have some current season product to sell, while European milk production is heading towards its seasonal peak,'' she said.
ASB economists expected prices to remain low over the next two to three months before beginning their rise, while Westpac senior economist Michael Gordon said futures markets suggested no increase was expected until late this year.
The prolonged slump was being driven by New Zealand production getting a ''second wind'' with the effect of the drought turning out to be modest, production forecast downgrades turning to upgrades and milk demand being weak.
Production growth was still expected to slow to the point where demand would catch up but that would occur later than previously expected, an ASB report said.
With some farmers losing money at current farm-gate prices, dairy production was likely to slow as the new season began. Chinese officials had also swung into action to boost the Chinese economy, which had struggled of late.
It usually responded well to stimulus, but the current growth weakness might require additional stimulus moves and demand might take longer to gain traction than first thought.
Factoring in the prolonged market weakness, ASB has downgraded its milk price forecast for next season from $6.20 to $5.70.
Westpac was also predicting $5.70. - Additional reporting NZME.
