Strong supply holds milk prices steady

Mr Repacholi said increased milk supply from the United States and the European Union meant there would be little impact on the international prices in the short-term.

However substantial cuts to farmgate price expectations in New Zealand could see production slow, which could have an impact on the international market.

Many NZ dairyfarmers are currently facing farmgate prices of NZ$4.70 a kilogram milk solids - a considerable cut from the more than NZ$8 of last season.

Generally for Australian dairyfarmers, the situation has not been quite so volatile.

"For Australian milk the situation has been comparatively stable," Mr Repacholi said.

However, this can depend on location with some regions going "particularly well" and others suffering from lack of rainfall.

"It's all about getting rain at the right time or having access to some inexpensive feed," he said.

The Bureau of Meteorology has indicated many parts of Australia are facing a drier than normal period.

Within regions of SA, particularly Mt Gambier, the lack of rain has created some concerns, however it is not all bad news.

"The SA challenges are more weather related than anything else," Mr Repacholi said.

"There is still a fair bit of competition in the market, which is positive."

He said the exporters from SA were still holding firm on prices, and were unlikely to see these change until new season rateswere released.

Mr Repacholi said that from March onwards, the industry might start to see some benefits.

"The second quarter is where we optimistically might start to see a recovery," he said.

He said a decrease in inventory could lead to a recovery in prices.

"Realistically we would not expect a steady increase in commodity prices until June or July 2015," he said.

If there is a recovery, particularly if it starts earlier than anticipated, companies could have a lift in confidence, which would lead to some conservatism in farmgate prices.

He said this might see a return to the traditional "step up" model in pricing, rather than the situation of 2014 when the starting price was bullish and there was no further increases.

A Rabobank Dairy Quarterly report released in December showed there was room for price stabilisation after low prices succeeded in clearing huge volumes of supply, with trade growth up 15pc, year-on-year.

The report, compiled by analyst Tim Hunt, has forecast a gradual tightening in second half of 2015, however this was reliant on weak southern hemisphere production.

If this occurred, Rabobank had pinpointed quarter four as the most likely time for price recovery to gain momentum in international markets.

While many in the industry are still celebrating the signing of the Chinese free trade agreement in November, Mr Repacholi said its benefits would not be visible in the short-term.

Chinese dairy demand is expected to grow at 3.5pc annually, according to Rabobank, while Australian milk production has plateaued.

A goal to lift production to 15 billion litres by 2020 would require "a fundamental shift" in supply growth, with the 2013-14 season closing at 9.2bL produced.

While 2014-15 should see production lift by 2pc, achieving the 2020 goal would require 8pc average annual growth.

Mr Repacholi said there could be benefits for any companies that were already exporting to China, but the timing of the tariff phase out would slow the impact.