With the lack of rain limiting pasture growth, particularly in the North Island, dairy farmers are using large volumes of alternative feed.
NZX Agri-Fax primary industry analyst Ivan Luketina said farmers have turned to using cheap imported palm kernel and the demand for New Zealand's home-grown feed grains is weak.
He said that is despite the high quality of domestic feed grains.
Mr Luketina said yields out of Canterbury are above average and the high pressure systems that have been dominating the weather have provided ideal harvesting conditions.
As a result, he said, the harvested grains are of high quality and low moisture content.