Dairy product prices have remained relatively stable, falling by 0.7 per cent across the board at the latest Global Dairy Trade auction, largely retaining the unexpected gains made a fortnight ago.

Whole milk powder prices (WMP) - which have the greatest bearing on Fonterra's farmgate milk price, rose 0.6 per cent to US$3,218 a tonne.

US-based Rabo Research Dairy Analyst Tom Bailey attributed the recent stability in WMP pricing to strong North Asian (primarily Chinese) demand.

"China's economy is recovering quickly, evidenced by the year on year Q2 GDP growth of 3.2per cent. However, there is still some concern regarding China's domestic milk powder inventories."

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While China has exceptionally strong domestic milk supply growth, Bailey said demand is stronger than expected, and manufacturers have struggled to substitute New Zealand WMP with domestic stocks due to differences in taste and colour profiles.

"This is a dynamic we will be watching carefully as we make our way through the second half of 2020."

Among the other so called "reference" products from which the milk price is calculated, skim milk powder prices fell 0.5 per cent to US$2,680/tonne.

Butter prices plummeted a further 4.9 per cent to US$3,533/tonne while anhydrous milk fat also declined, falling 2.8 per cent to US$3,870/tonne.

In a market update on July 17, Fonterra lowered the midpoint for the 2019/20 season by five cents to a range of $7.10 and $7.20. The co-op also narrowed its forecast for the current 2020/21 season to between $5.90 to $6.90 per kg.