UPDATE 1-Global dairy prices jump 3.7% on dampened supply

(Recasts; adds analyst comment, market reaction)

WELLINGTON, Nov 6 (Reuters) - Global dairy prices surged 3.7% at a fortnightly auction held early on Wednesday, boosted by constrained global supply and New Zealand production.

The GDT price index climbed to $3,446 per tonne, after rising 0.5% at the previous sale.

Lower production from New Zealand, the world’s biggest dairy exporter, was behind the surge, according to analysts, and that combined with lower global supply would likely continue to support prices.

“Last night’s GlobalDairyTrade auction saw healthy gains, the recent modest slowdown in production one possible explanation,” said Imre Speizer, head of New Zealand strategy at Westpac Bank. “The implication from a supply perspective is that prices should at least remain firm.”

Prices for whole milk powder, the most widely traded item, rose 3.6%, a little ahead of futures market expectations, while skim milk powder jumped 6.7%.

A total of 38,681 tonnes was sold at the latest auction, falling 0.1 percent from the previous one, the auction platform said on its website.

There were some signs of dented demand from Asia with Chinese buyers as a share of the total dropping from 55% to 48%, the lowest since July, according to Westpac.

The auction results can affect the New Zealand dollar as the dairy sector generates more than 7 percent of the nation’s gross domestic product.

However, the New Zealand dollar struggled against a rallying U.S. dollar, falling 0.3% to trade around $0.6380 on Wednesday morning.

GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.

The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.

U.S.-listed CRA International Inc is the trading manager for the twice-monthly Global Dairy Trade auction.

The auctions are held twice a month, with the next one scheduled for Nov. 19. (Reporting by Charlotte Greenfield Editing by Leslie Adler)