New Zealand bank ASB on the Global Dairy Trade auction result overnight

(bolding is mine)

  • Chinese economy concerns are spilling over into dairy markets, keeping prices subdued
  • Chinese GDP growth ended 2015 at its lowest in pace 25 years
  • The January dairy price falls follow a similar episode in July 2015 ... the recent falls are more modest, especially when compared to other commodity markets such oil
  • We believe that tightening dairy supply and exports have buffered the fall so far
  • Thus if Chinese growth concerns recede, we expect dairy price strength to soon return
  • However, the farm-gate benefits of any dairy price recovery is likely to now accrue to next season
  • Our view remains that dairy prices will move higher over 2016
  • NZ dairy production and exports are tightening. But with Chinese concerns likely to persist at least in the short term, the price recovery is likely to prove stop-start
  • With over 60% of this season's volumes sold, we trim our milk price forecast by 50 cents to $4.10/kg
  • In effect, we defer the farm-gate benefits of dairy price recovery to next season for which we stick with our $6.50/kg forecast

And, on the Reserve Bank of New Zealand:

  • This result reinforces our OCR view; we expect two further cuts in June and August 2016, taking the OCR down to 2%.