The short-term outlook for world dairy markets has been described as underwhelming by global specialist rural financier Rabobank.
But, while New Zealand dairy exporters have been scathing of the United States and Europe reintroducing export trade subsidies for dairy products, a Rabobank publication said intervention buying by northern hemisphere governments and China had sustained global prices at their present levels.
China and intervention authorities in the US and EU bought 200,000 tonnes of milk powder in the first quarter of this year, about 25% of normal internationally traded volumes for that period.
Rabobank senior analyst Hayley Moynihan said lower world dairy production had not been sufficient to offset weak markets and prices, but she was hopeful the environment would turn in favour of sellers later this year.
Demand would benefit from improved availability of credit, falling milk production, rising incomes and lower pricing, but Ms Moynihan warned recovery would be slow.
The long-term fundamentals for dairy products were sound, but in recent months international dairy commodity prices had made little headway, she said.
Global milk production had not fallen as much as expected.
Any decline in northern hemisphere production had been balanced by growth in New Zealand from areas recovering from last season's drought.
While there had been tentative signs of recovery in recent months, Ms Moynihan said that had boosted sentiment rather than provided tangible or substantial benefits.
The redirection of dairy products to warehouses has allowed Oceania exporters to increase shipments to markets by 10% in the first quarter of this year.
Ms Moynihan said the improved season and movement of stock held over from the last quarter of 2008 had pushed up export volumes by 53,000 tonnes in the first three months of this year, with skim milk powder and butter export volumes particularly strong.
Dairy product prices in the next quarter would be influenced by two contrasting northern hemisphere factors - intervention buying and export subsidies.
Ms Moynihan said the impact of subsidies would be limited by "the underlying shift in political appetite for such policies in the EU and US," but was likely to keep prices at current levels through the third quarter of this year.