Dairy prices flat as China's sluggish economy puts handbrake on exports

But prices are still around the long-term average.

The Global Dairy Trade price index was up 0.1 per cent at the April 16 auction.

The overall results masked falls in some commodities with cheddar down 8.5pc, mozzarella down 3.8pc, butter down 1.4pc and lactose down 1.3pc.

Skim milk powder was unchanged, while whole milk powder recorded a slight 0.4pc rise.

The best performer was anhydrous milk fat, up 1.7pc.

Chinese economic uncertainty was weighing on the market, although the global growth outlook had improved, Westpac's New Zealand chief economist Kelly Eckhold said.

"US growth looks especially strong," he said.

The strengthening US economy had prompted the International Monetary Fund to change its global growth outlook.

"There are also signs of better times in emerging and developing market economies (India looks especially strong)," he said.

This would present some opportunities for NZ exporters.

"But its still the case that the Chinese economy is flat and risks remain there," he said.

Dairy Australia industry analyst Isabel Dando said in the past two years, the weight of China's weakening economy had been felt through global demand for dairy.

"While accelerating inflation and increasing interest rates greatly reduced purchasing power across both the developed and developing worlds, a different kind of challenge was emerging for China - its economy was turning deflationary," she said.

"The world's second largest economy slipped into deflation in July last year."

Ms Dando said China was the world's largest dairy market and the key price driver of global dairy export prices.

Its complex economic slowdown was a significant risk for dairy export commodity prices.

"Demand for both local and imported dairy across China has been lacklustre, and ongoing consequences of strict COVID-19 control measures and increased regulation on private enterprise continue to emerge, creating economic headwinds on several fronts," she said.

"Generally sluggish consumer demand is being amplified by a prolonged real estate crisis, uncertainty around youth employment and an ageing population.

"The risk of falling prices and persistent deflationary pressure has the potential to further undermine business and consumer confidence across China."

Ms Dando said Chinese milk production had strengthened in recent years, exacerbating low importing demand.

Between 2021/22 and 2022/23, global dairy exports to the country fell 9pc.

Australian exporters were particularly hard hit as China was one of their largest markets - with a 12pc drop in the same period.