Global dairy demand and global dairy production are effectively at a standstill. Nathan Penny, a senior economist at Westpac NZ, expects that Chinese demand for dairy products will continue to grow, driving up global dairy prices.

Global dairy product auction prices have remained unchanged. Overall prices and key prices for whole milk powder (WMP) have been steady. Prices for different dairy products have been more mixed.

Milk fat prices have seen solid gains, with butter prices increasing by 5.5%. Skim milk powder and cheddar prices have declined by 2.3% and 3.3%, respectively.

Looking ahead, economist Penny sees two possible risks. One is the much-anticipated rebound in dairy demand from China, and the other is New Zealand's spring dairy production.

"Our view is that Chinese demand for dairy products continues to grow and pushes up global dairy prices," says Penny. "Although, of course, the risks are that the expected demand rebound could be pushed even further."