Bank of New Zealand economist Doug Steel is still forecasting dairy prices will moderate somewhat by the end of the year but the near-term indications are that prices will keep rising for at least a little while yet.
In Fonterra's fortnightly auction on Wednesday, world milk prices edged up and volumes fell - 35,399 tonnes were sold, falling 13.7 percent from the previous auction.
The Global Dairy Trade index rose 0.5 percent, with an average selling price of $US5042 per tonne.
Mr Steel says the outcome is still encouraging, despite the drop in volumes.
He says the result suggests the market remains very tight and it's not likely that will change very much in the near time.
But Mr Steel says prices are still expected to be lower by the end of the year on the basis that there will be more milk out of the Northern Hemisphere in response to the current and previously very high prices.
He says feed prices in the United States are a lot lower and milk prices there are a lot higher which will encourage more production and pull down prices down the track.
But Mr Steel says currently the market is still fairly buoyant.
