Milk prices rose for a third consecutive time and volumes fell in Fonterra's latest international auction.
The Global Dairy Trade-Weighted Index rose 4.9% with an average selling price of $US4828 per tonne. That compares with $US2756 per tonne in July last year.
The benchmark whole milk powder price surged 7.7% to more than $US5000 a tonne. Buttermilk powder was up by 4.8%.
Nearly 38,000 tonnes of product was sold at the auction overnight on Tuesday, down 2.4% from the previous auction two weeks earlier.
BNZ economist Doug Steel said the strengthening dairy market is largely driven by tight supply globally pushing prices higher and robust demand. "It bodes well for a decent income lift for the economy," he said.
Prices are back to levels seen in April after pulling back in May and June.