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Butter and cheese prices slumped in this week's GlobalDairyTrade auction which also fell 3.4% overall, the second consecutive decline.
Having surged through the first half of 2019, butter prices fell 10.3% overnight, although prices remained around 23% higher than the end of 2018 levels,
That might indicate an easing in global milk fat markets, ASB senior rural economist Nathan Penny said.
The sudden slowdown in New Zealand production, given the hot and dry summer weather, had previously put the squeeze on milk fat markets and this week's result suggested some pullback, Mr Penny said.
Key whole milk powder prices held up relatively well, falling just 1.5%, which was broadly in line with ASB's expectations for a 2% decline.
Overall, WMP prices appeared to be consolidating as the market awaited the usual lift in spring milk volumes.
Despite this week's overall dip, ASB expected dairy prices should continue to push towards cyclical highs.
New Zealand production growth had passed its cyclical peak and production growth for other major dairy exporters was also soft.
Fonterra's opening forecast for the new 2019-20 season was $6.25-$7.25 with advance payments to farmers to be made at the $6.75 midpoint of that range.
Westpac senior economist Anne Boniface said the bank retained a slightly more optimistic view than Fonterra on the outlook for now, although this week's auction result was a little softer than it had pencilled in.
Markets also seemed to be a little more constructive than Fonterra on the outlook for the new season, and milk price futures were $6.85 after earlier briefly trading above $7.
Synlait also had a slightly more optimistic outlook and announced an opening season forecast of $7.
BNZ rural economist Doug Steel said said Fonterra's forecast range was wider than the co-operative had adopted in the past, although there were plans to narrow the range as the season progressed.
There was some irony in establishing a wider forecast range when milk price volatility had diminished somewhat over the past couple of years.
But the bank saw a wider range as a good move, as it gave a sense of the uncertainty around any point forecast this far out from the end of the season, he said.