The latest GlobalDairyTrade (GDT) result was weak, offering no clear signals of price recovery, AgriHQ dairy analyst Susan Kilsby said.
The GDT index lost 1.4% but whole milk powder (WMP) prices rose 0.7% because a small volume was offered.
Just back from a Chicago Mercantile Exchange event in the US, Kilsby said opinions among dairy analysts were divided.
Some were convinced the bottom of the trough had been reached and recovery was imminent but others said world prices would be down for a while longer.
Her own view was that when New Zealand milk production rose in spring, GDT offerings increased and European Union intervention stores were full, world prices might go lower.
The EU recently doubled the allowable volume of skim milk powder in intervention to 218,000 tonnes at US$1950/tonne equivalent but that was filling up quickly.
Newer processing capacity in Europe was capable of switching to WMP and that might flood world markets, she said.
Westpac economist Anne Boniface said European dairy farmers were feeling the pain of lower prices but responded by lobbying their governments for support.
The more efficient producers in Ireland, Denmark and the Netherlands were continuing to grow milk production while some of the less-efficient eastern European producers were falling behind.
In the US a favourable feed/milk price ratio meant producers there were the most comfortable in the world, Kilsby said.
Massey University agribusiness professor Hamish Gow reported grain silos were full and prices low so US dairy farmers could afford to feed larger quantities and produce more milk.
US milk production rose 1% in the past year but 4% in February compared with the previous February.
European milk production was up 3% in the past year but 5% up in January and had averaged 5% growth over the past four months, the northern hemisphere winter.
ASB rural economist Nathan Penny said lower dairy prices through GDT showed buyers were not convinced supply was tightening.
“Recent production figures out of Europe have been unconvincing on this front.”
However, Penny thought EU figures would trend towards zero by the middle of the year.
Fonterra would come out later this month with an opening forecast near $5/kg, he predicted.
