Although milk production is continuing to fall because of the lack of rain, especially in the south island, demand from China continues to be weaker than expected.

However, exports to other markets including the UAE (United Arab Emirates), Malaysia, Indonesia and Algeria have jumped to record annual levels in 2014, according to official trade data.

Analysts expect the rise in global dairy prices to continue in the coming months due to tight supplies and Fonterra’s forecasted drop of 3.3%. Prices may remain under pressure later in the year with increases in milk supply in the EU and US.

Kerry boss advises caution on dairy expansion