An expectation that the supply of dairy products will slow has helped lift prices globally, with Fonterra's twice-monthly auction rising by 6% to an average winning price of $US3174 a tonne.
Prices are still below their peaks of early last year, but BNZ economist Doug Steel says the effect of the drought in the US on the cattle feedstock price and lower milk production in New Zealand are weighing on prices.
He says last season's massive increase of milk out of New Zealand and Australia is now largely depleted and prices have lifted as supply has tightened up a bit.
