Prices on the GlobalDairyTrade platform may drop for a third straight auction tonight as supply outstrips demand.
Futures trading on the NZX on Tuesday morning indicated whole milk powder prices will slip 3 per cent, skim milk powder will drop 6 per cent and milkfat products such as butter and anhydrous milk fat will decline between 2 and 3 per cent, according to AgriHQ senior dairy analyst Susan Kilsby.
Fonterra, the world's largest dairy exporter, earlier this month announced it would lift the volume of whole milk powder and skim milk powder offered in coming auctions on the GDT platform by about 25,000 tonnes as more favourable weather meant it collected more milk than expected from its farmer suppliers.
"We did see some gain in whole milk powder prices last week but since Friday the future market has eased back," Ms Kilsby said.
"There is nearly 10 per cent more whole milk powder available at this auction than the previous event so it will be a challenge for the market to absorb this extra volume without some slippage in price."
Dairy products are New Zealand's largest commodity export, worth $11.25 billion in the year ended January 30, according to the latest data from Statistics New Zealand.
The next GDT auction will be held on Wednesday morning NZT.