Peak production was around October 29 when Fonterra plants processed between 85 and 86 million litres in 24 hours, compared with 82m last October.
The GDT price index on November 7 fell by 2% and the cumulative fall over the past six months has been 17.6%.
The GDT index on May 15 was 1065 and it now stands at 877.
There has not been an upwards move since mid-May when the market started worrying about the supply surge for NZ milk.
In the latest auction whole milk powder prices fell by 2.9%, butter by 1.7% and anhydrous milk fat by 1.3%.
Market commentators say strong NZ milk production is dragging down world dairy prices, now at their lowest level since August 2016.
ASB senior rural economist Nathan Penny said anecdotally NZ milk production went up a gear in October, the peak month for production, though the data will not be published until mid November.
“If these anecdotes prove correct then the extra milk will put further downward pressure on dairy prices,” he said.
“There is an increasing chance of an El Nino weather pattern this summer and the associated dry could halt production later in the season.
“For now the momentum is on the side of production and we expect some strong production numbers over the next month or two,” Penny said.
The ASB forecast farmgate milk price remained at $6.25/kg but with downside risk from further strengthening in milk production.
While the rise in NZ production this spring has been welcomed by farmers and processors it is only small by world scale and by historical patterns.
For example, Fonterra processed 87-90m/day litres at peaks in 2013, 2014 and 2015 before low world prices prompted farmers to cut cow numbers.
A season-sustained 5% increase in milk production would take NZ exports back to the level sold in 2014-15.
Notwithstanding steady European and United States production and exports increases since, demand for dairy products in world markets, especially China, has grown considerably.
A senior Fonterra executive said at the company’s annual meeting the prolonged fall in GDT prices over the past six months appears to be an over-reaction to NZ production recovery.
For now Fonterra will maintain its prediction of $6.25-$6.50/kg milksolids for the NZ farmgate price but it is required to make a firm, single-figure forecast in early December under the terms of the Dairy Industry Restructuring Act.
Farmers will hope that number falls within the existing prediction range, even at the lower end.
NZX dairy analyst Amy Castleton said her computer forecast rose 8c to $6.26 after the GDT event.
Prices for WMP futures had firmed and contracts for December to June delivery rose US$20-$65/tonne.
The derivatives market expects the WMP recovery to be US$2830/tonne by next July, compared with $2655 now.
Westpac senior economist Anne Boniface said auction prices will have to rise significantly in 2019 for Fonterra to be able to pay in its forecast range.
