New Zealand-based dairy co-operative Fonterra has cut the price it intends to pay milk farmers, in response to the dipping dairy prices in the global market.

The prices have been dipping due to excess production in the global market in addition to a drop in demand from China and Russia, reports Reuters.

Fonterra reduced its farmgate price forecast to NZ$4.70 ($4) per kilogram of milk solids for the season commencing June.

This price is the lowest in eight years and a major drop from 2013’s record-high price of NZ$8.40.

Fonterra anticipates that the demand from China would increase at a slower pace due to the economic slowdown.

Currently, the dairy cooperative anticipates the demand in China to grow annually at 4% through 2020, which is less than the expected 7%.

In a statement, Fonterra chairman John Wilson said: "There is still considerable volatility in global dairy markets.

"Right now we are seeing a number of factors that are delaying a sustained return to higher global prices."

This year, in the international market, dairy prices have dipped up to 50%.

Chinese firms have cut orders for dairy. Besides, Russia has imposed a ban on dairy imports from Europe in response to the latter’s sanctions over the Ukraine conflict. All these factors have led to supply glut.

The dairy industry accounts for about 25% of the total exports in New Zealand.