In its latest commodity reports, the banking giant says that the dramatic shift in price momentum in the closing weeks of August reflected a combination of technical and fundamental changes to the market, and changes to sentiment.

It says a rapid rise in the value of the US dollar against the currencies of other major dairy exporters (up 8-12pc against the Australian dollar, euro and New Zealand dollar in the six weeks to end of August) saw all players re-evaluate traded prices—generating downward pressure on prices.

But on the market fundamentals, Rabobank says US supply growth is staying stronger for longer than expected and Brazil's export surplus is growing rapidly.

And on the demand side weak consumption growth in the US and the EU is also forcing more product onto the international market than would otherwise have been the case.

In import markets, ongoing inflation in dairy prices is colliding with slowing income growth, and a sharp fall in vegetable oil prices has increased the appeal of substitution for dairy, the report states.

Market sentiment appears to have also been impacted by the announcement of lower-than-anticipated prices generated by Fonterra's August auction of white milk powder for October delivery.