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Pressure is building on Fonterra's forecast farmgate milk price for the current season, following back-to-back 5.0 per cent drops in the overall Global Dairy Trade index.
This morning's decline is now the fourth in a row, and ninth in the last ten auctions, after the record high achieved on March 1.
Whole milk powder (WMP) - which has the biggest influence on Fonterra's farmgate milk price - slipped 6.1 per cent, on the back of a 5.1 per cent decline in the previous event, to an average US$3544/MT.
Skim milk powder (SMP) - Fonterra's second-biggest reference product - fell 5.3 per cent to an average US$3524/MT, continuing its downward trajectory from the last event where it plunged 8.6 per cent.
Just six weeks ago, both milk powder products were commanding well above the US$4000/MT mark, and in March peaked at US$4757/MT for WMP and US$4481/MT for SMP.
All other reference products on offer also fell, with butter - which commanded US$7086/MT in March - down 6.1 per cent to an average US$5194/MT.
Anhydrous milk fat fell 1.4 per cent, to an average US$5518/MT, while cheddar dipped 0.7 per cent to an average US$4798/MT.
Butter milk powder - often not offered on the GDT platform - fell 9.2 per cent to an average US$3724/MT.
Lactose and sweet whey powder were not offered at this event.
NZX Dairy Insights Manager Stuart Davison said the way the auction played out "paints an interesting picture of the dairy landscape currently."
"As with the last auction, this auction was punctuated by an overall lack of demand, with bidding round information highlighting that bidders weren't willing to chase prices higher."
27,500 MT of product was purchased by 120 successful bidders, which Davison said highlights that on average more buyers took smaller volumes of dairy products this time around.
"This trend is likely a result of the current outlook of the wider economy for some buyers, with uncertainty of the future still front and centre for most, creating an unwillingness to be burdened with heavier than required pipelines of product at this point in time.
"However, it must be noted that this auction also registered good participation from all regions, which highlights that demand isn't completely lacking currently."
On June 23, Fonterra lifted its 2022/23 forecast by 50 cents to between $8.75 - $10.25 per kgMS, from an opening range of $8.25 - $9.75.
The revised 22/23 forecast midpoint, off which farmers are paid, stands at $9.50.
While the GDT auction was important, it was only one factor affecting the payout, managing director of co-operative affairs at Fonterra, Mike Cronin said.
"We're still forecasting almost 15 months out so we've got a whole range of factors that we'll have a look at," Cronin told The Country's Rowena Duncum.
Supply in the US had increased, while in the EU it was "going backwards," which had influenced the drop in whole milk powder, Cronin said.
As for demand, the world was watching China and its ongoing Covid lockdowns.
Listen to the full interview on The Country below:
Fonterra was waiting for the Chinese Government to allow people outside again to "stimulate demand right across the board," Cronin said.
Heightened global tensions over Taiwan also had the business sector nervous about China.
Fonterra's chief executive Miles Hurrell spoke at the China Business Summit recently, along with Prime Minister Jacinda Ardern, Cronin said.
"We think we can work these things through. There's an understanding about the US, China and New Zealand, and where we all fit in. So we've just got to keep at that."