Global dairy prices appear to have bottomed with a third consecutive increase at the Global Dairy Trade (GDT) auction.
The GDT price index lifted 4.4 per cent on Tuesday, October 3.
This follows a 4.6pc increase at the September 21 event and a 2.7pc increase at the September 5 event.
But prices are still well behind levels at the same time last year.
Pundits are still cautious about the price outlook, pointing to continuing subdued demand from China.
Tuesday's auction lift was led by a big jump in skim milk powder, up 6.6pc, and whole milk powder, up 4.8pc.
Anhydrous milk fat was up 3.7pc and butter 1.3pc.
But cheddar (down 4.8pc) and lactose (down 1.3pc) bucked the trend.
"Prices are still south of where they started the season, but it's good to see some recovery, and farmers will be hoping prices have found a floor and are set to sustain their recent gains from here," ASB economist Nat Keall said.
But there appeared to be little sign of China returning to the market, something the bank saw as critical to any sustained price recovery.
"South-east Asia and the Middle East have stepped in to pick up some of the slack, but it's difficult to see prices press much higher without a more active presence by the behemoth of global dairy imports," Mr Keall said.
"It remains to be seen when that will occur, with much of domestic Chinese economic data still looking fairly soft amid the property market downturn."
Westpac senior agri-economist Nathan Penny said while the recent positive results were welcome, global dairy prices remained low.
WMP prices had not yet fully made up ground lost in August when prices fell 18pc.
"With that in mind, it's difficult to judge yet whether prices have fully turned a corner," Mr Penny said.
"To make that call we will need to see further price lifts over the remainder of the year.
"Indeed, the recent price rises may have much to do with the fact that low prices have brought buyers back to the market rather than any fundamental change or improvement in global dairy demand."
Several factors were still at play in the market, including recent oil price increases that have coincided with an uptick in buying from the Middle East, continued subdued demand from China, New Zealand spring production and the value of the NZ dollar.
"In other words, there's a lot of water still to go under the bridge this season," he said.
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Carlene Dowie
Carlene Dowie is the editor of the Australian Dairyfarmer magazine and has more than 30 years' experience as a rural journalist.
Carlene Dowie is the editor of the Australian Dairyfarmer magazine and has more than 30 years' experience as a rural journalist.
