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Prices in this week's GlobalDairyTrade auction posted their ninth successive price gain, up an overall 0.8%.
Butter and casein prices led the gains, up 5.8% and 7.5% respectively, while key whole milk powder prices dipped 1.3%.
That fall was broadly in line with expectations and came after prices had surged nearly 25% from the end of 2018, ASB senior rural economist Nathan Penny said.
The impact of dry New Zealand weather now appeared largely factored into prices by dairy markets, Mr Penny said.
New Zealand production growth had passed its cyclical peak, while production growth for other dairy exporters was already soft.
In addition, global dairy stocks were now much lower than in previous years and lower stocks meant less of a buffer for dairy markets in the event of any supply shock. Global demand was also firm.
The combination of those factors pointed to dairy prices moving towards a cyclical peak over 2019, Mr Penny said.
The auction result reinforced ASB's 2018-19 milk price forecast of $6.60 and the bank continued to see upside risks to its already bullish 2019-20 milk price forecast of $7.
He cautioned the 2019-20 season was yet to begin and so the forecast came with a very wide range.
Westpac senior economist Anne Boniface said the strength of Chinese demand for dairy in recent months was notable. Chinese dairy imports were up 14% over January and February combined. In this week's auction, buyers from the north Asian region, dominated by China, snapped up more than 50% of product on offer, just ahead of demand a year ago.
Westpac's view was that while GDP growth in China was set to slow noticeably this year, that slowdown would not be central in the household sector. That should be a ''silver lining'' for New Zealand agricultural exporters who were heavily reliant on Chinese consumers, she said.
The outlook for milk production globally was mixed; Australian milk production was down 11% in January compared to a year earlier and national production was 5.8% lower for the season to date.
Australian farmers had struggled with high costs, shrinking herds and reduced supplementary feeding.
Export volumes had not been as weak, given total Australian dairy export volumes were down 0.7% for the season to date, led by a 40% fall in whole milk powder export volumes.
In the US, milk production was up an estimated 0.6% in February on a year earlier. Like New Zealand, the national dairy herd had been shrinking and the growth in milk collections had been driven by productivity improvements.
European milk collections were down 1.5% in January, although that degree of weakness was not expected to persist. Most forecasters expected EU milk production to be up a little more than 1% this year.