Milk powder on a spoon© Rex

World dairy prices slumped heavily this week, wiping out the tentative recovery since early January.

The average winning price on the Global Dairy Auction fell 10.8% on Wednesday (1 April) – the day EU milk quotas were abolished.

All products suffered heavy losses, with whole milk powder values dropping 13.3% to $2,538/t and skim milk powder back 9.9% to $2,467/t.

See also: Milk quota abolition – everything you need to know

After rising for six sales running since mid-December, the key global indicator has taken heavy drops in the past two sales.

Supplies remain down more than 40% on the year, with just 23,162t sold.

Dairy markets have been highly sensitive in 2015, with uncertainty over drought in New Zealand and how much milk European nations were ready to produce once quotas ended.

A DairyCo report said drops might not be cause for immediate alarm, as the market was probably rebalancing after stronger-than-expected rises.

“Many analysts believe that global prices are in period of stability and it won’t be until summer/autumn before a recovery will start to take place, albeit with some bumps in the road possible,” the report said.

The Dairy Group’s Nick Holt-Martyn said dairy companies had been blaming the GDT auction as the reason for cutting prices. But 77% of British milk went into liquid and cheese so should not be too affected.

He said Defra’s average UK farmgate price of 27.2p/litre in February was well above the GDT March average of 24.7p/litre, although British milk prices were spread over a broad range.

“When the majority of a dairy company income stream is based in the core/liquid cheese sectors, blaming the GDT, which is more than 81% milk powders, is not good enough,” Mr Holt-Martyn said.

January figures for EU milk production put deliveries up just 0.1% on the previous year, at 11.6bn litres.

Germany was down 1.4% on 2014, Ireland was back 14.9% and Dutch production was 2.1% lower, as countries tried to avoid a final year of fines for overshooting quota.

This week, Arla’s rival European co-op FrieslandCampina cut its guaranteed milk price for April by €0.75 to €33.25/100kg (24.3p/litre).