His successor at ANZ Susan Kilsby said "even the lower end (Fonterra's forecast) might be slightly optimistic the way I'm reading the market".
The 18 per cent fall in average prices on GDT since May suggested strong global market demand was abating, but on the potential upside was New Zealand's relatively weak dollar which supports milk price, and high prices for livestock feed in Europe after a dry summer there which could stem production, she said.
In the latest GDT auction on Monday night, prices fell 2 per cent overall. The price of wholemilk powder, New Zealand's main dairy export and the foundation of the milk price to farmers, dipped 2.9 per cent to US$2655/tonne.
ASB economist Nathan Penny said overall GDT prices had now fallen in 10 out of the last 11 auctions, now at their lowest level since August 2016.
ASB recently revised its milk price forecast down from $6.50 to $6.25 and Penny said there is now downside risk to that.
"The key factor is New Zealand production is very strong - 5 per cent ahead of last season so far. That's put pressure on our forecast."
Penny was expecting "some strong production numbers over the next month or two."
ANZ's Kilsby said several influences could offset the price effect of New Zealand's strong production season so far.
European farmers had come through a very dry summer and used a lot of their winter feed. As a result feed was now costly. Australia was struggling with drought and there was potential for a dry summer in New Zealand too.
"Fonterra's milk production forecast is very strong but we'd be unlikely to see that much milk if we get a dry summer," Kilsby said.
When Fonterra cut its milk price forecast last month it also raised its volume forecast by 1.3 per cent to 1550 million kg milksolids.
The strong spring flows are on the back of three seasons of falling production but the size of the rebound has been a surprise, Penny said.
"It's largely a New Zealand story at the moment," he said.
Kilsby said the biggest risk to milk prices was potential weakness in the China market.
"Their economic growth rates are slowing though the economy is still growing, which affects discretionary spending and in China you'd put dairy products into that category."
The trade war with the US could mean China does not get its normal export orders which in turn would crimp imports.
The ANZ was reviewing its $6.40 milk price forecast, Kilsby said.
For now ASB was sticking with $6.25, Penny said.
Meanwhile the US Dairy Export Council has reported "aggressive" milk powder sales to Mexico and southeast Asia in September.
The council told the Herald US wholemilk powder production was up 49 per cent this year.
Spokesman John Dutcher said the aggressive selling was possibly a move to avoid inventory build-up.
Total US wholemilk exports for the month were up 164 per cent at 6655 tonnes, the highest level in more than eight years.
Nearly all went to Vietnam and Singapore. In contrast sales to China were just 40 tonnes, a fraction of what was shipped last year.
"US wholemilk powder prices have been substantially lower than those of New Zealand for the past few months," Dutcher said.
On the fall in sales to China, he said Chinese trade war tariffs had negatively impacted momentum American exporters had been building in wholemilk powder sales to China.
Sales to China in March had been a record 3223 tonnes but had sunk to just 132 tonnes in the third quarter, he said.
