The dairy news this week from New Zealand suggests they are going to continue to grow markets in China. Some commentators felt New Zealand had put all its eggs in one basket and that was one of the reasons why milk price was so low in New Zealand. Addressing the China Business Summit in Auckland this week, he said Fonterra was aiming to grow its business in China from around $5bn in 2014 to $10bn over the next five years.

Another interesting snippet from New Zealand this week saw Chinese dairy giant Yashili open an infant formula plant in Pokeno, south of Auckland. The manufacturing investment cost NZ$220m (€135m).

This week, Fonterra chief executive Theo Spierings also said losing Chinese market share to European dairy competitors is a concern for New Zealand.

On the supply side, New Zealand peak milk happened on 22 October (over two weeks ago) and was down 5% to 86.9m litres from 89.6m litres in 2014. Despite the thinking that all Fonterra product is going into commodities, the opening of five new plants in the last year is now allowing them divert milk into higher value products.

In the US, milk production forecasts for 2015 and 2016 are reduced from last month as the dairy herd is expected to decline more rapidly from its second-quarter peak and growth in milk per cow in 2015 remains slower than expected.

Largely uncompetitive prices are likely to limit growth in export sales of butter and to a lesser extent, cheese in 2016, and fat-based exports are reduced.

Strong domestic demand for butter is expected to support relatively high butter prices during the remainder of 2015, but supplies are expected to be large, so the price forecast for 2016 is lowered.