This Wednesday's GlobalDairyTrade (GDT) auction looks set for another scramble to secure product, creating further upward pressure for dairy prices, ANZ rural economist Con Williams said.
Milk supply appears to be tightening more quickly than first thought, prompting more buyers into action, Williams said in a commentary.
New Zealand has had a slow start to the new season, and with carry-over inventories from last season tight, this has forced more buyers on to the GDT platform to secure product, he said.
European production was down 1.5 per cent, year on year, in June, with notable softness across the three largest producing countries - Germany, France and the UK, which account for 47 per cent of annual European production.
Williams said there was a suggestion that milk supply had tightened in China due to dry conditions across the northwest of the country where the majority of its milk is produced.