Radio New Zealand - Te Reo Irirangi o Aotearoa

The latest Fonterra auction of milk powder saw a jump of 24% on Tuesday night.

Prices were $US2858 per metric tonne. They are now up by 50% at the last two auctions.

However, Radio New Zealand's economics correspondent says returns are still fall far short of March last year when milk powder was $US4750 per tonne.

Fonterra issued its last forecast for the current season's payout of $4.55 per kg of milk solids in May.

It says the big price rises are due to falling global milk production and firming demand from customers.

Milk production in the United States and Europe has fallen because of weak prices in the past two years.

Supply from New Zealand is at low levels because of the harsh winter and low seasonal production.

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Australian content

The September auction included a limited range of milk powder from Fonterra's Australian operations, which was first sold during last month's sales.

From November, the company will expand the monhly auctions to include anhydrous milkfat, used mainly with skim milk powder when making liquid milk, as well as in commercial baking.

Dairy products account for around a quarter of New Zealand's export earnings, which reached $42.8 billion in the year to the end of July.