Key whole milk powder (WMP) prices slid 6.2pc, while overall prices fell a more moderate 4.7pc.

According to Nathan Penny analyst with ASB bank in New Zealand, the result could have been worse with futures pricing ahead of the auction pointing to a circa 7pc fall.

“We also note that the 6.2pc is relatively modest by historical auction standards.

“For example, roughly 14pc of auctions have recorded larger than falls than the auction overnight. Other auction prices fared better.

“Three products recorded price gains (cheddar, casein and butter) while the overall index was down a more modest 4.7pc,” he said.

However, other details hinted that the price fall may be short-lived.

“Prices for later-dated contracts were higher than for shorter-dated ones. “Notably, Chinese buyers were still active, with the number of buyers from North Asia bang on the average number for the last three months. “Nonetheless, we remain vigilant. The outbreak situation is very fluid and, with that in mind, dairy price implications are subject to change. Over the coming days, we will monitor the dairy futures market for further market developments ahead of the next auction in two weeks’ time,” he explained.

Penny also said traders had also begun to return our gaze to NZ drought conditions.

In particular, the key Waikato region is very dry in parts, while the Taranaki, Northland, Nelson and parts of Canterbury are also very dry.

“If drought conditions continue to worsen over coming weeks, dairy prices have the potential to swing quickly back the other way,” he said.