Milk powder prices in Fonterra's latest global online auction overnight on Tuesday have jumped.
The world's biggest dairy exporter says the average selling price for whole milk powder rose $US688, or 21%, in March to $US3969 per tonne. It follows a rise of 0.8% in February.
Skim milk powder showed the biggest increase of about 25% to more than $US3600 per tonne.
Fonterra global dairy trade manager Paul Grave says it is the biggest price rise since August and September last year when prices started to recover from the commodity slump.
Higher payout tipped
Federated Farmers says the price rise could add up to 10 cents to Fonterra's end-of-season payout to farmers. The current estimate is $6.06 per kg of milk solids.
Federated Farmers' dairy section head Lachlan McKenzie says most of the current season's production has been sold.
He says the price rise should flow through to this season's payout, but the bigger impact will be on next season's payout.
Fonterra says strong demand and a seasonal shortage of supply helped lift prices at the latest auction.
A Northland dairy farmer hopes Fonterra will pass on as much of the latest increase in milk powder prices to its farmer shareholders as possible. Bruce Paton, who farms 800 cows, says the drought has taken its toll, and any increase in the payout would be welcome.
BNZ senior economist Craig Ebert says a squeeze on production caused by dry conditions in some parts of New Zealand played a role in increasing international milk prices, and the rise was bigger than it expected.
However, Mr Ebert says the bulk of the increase was in near-term transactions, with prices for contracts further down the track not moving as much. He suggests international milk prices have now largely stabilised.
