An expert is tipping a 17 percent increase in dairy prices in the overnight global dairy trade auction.
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Westpac currency strategist Imre Speizer said the dairy futures market was predicting the 17 percent increase.
The dairy futures market allows traders to take a bet on what will happen to the price of wholemilk powder, the price of which has begun to rise from record lows seen earlier this year.
Mr Speizer said the dairy futures markets appeared to be closely reflecting what happens at Global Dairy Trade auctions - and based on that prices should rise.
"They've been predicting bounces for the last few auctions and been accurate in doing so, we have no reason to think anything different," Mr Speizer said.
"I think there'll be a number of reasons why they are predicting another rise. We have Fonterra having said that production will be lower for this year. We also have the threat of an El Nino-induced drought this summer and on top of that we are hearing anecdotes of reasonable demand at these levels - so all of that should conspire to give prices a lift at the auction.
"The last few months (the dairy futures market) has been bang on and you wonder why that is. I would hypothesise it is more participants playing in that futures market which means you've got a lot more better informed people who know what's going on in the underlying dairy scene and as a result you'll have a much better price prediction."
