NZX dairy futures whole milk futures have broken through the US$3000/tonne level for the first time in more than a year, putting upward pressure on Fonterra's farmgate milk price forecast.

The US$3000 a tonne level is generally regarded as the break-even point for farmers, although adverse currency movements can hinder beneficial price movements.

"When you see US$3000 a tonne it is certainly a good indication," AGriHQ dairy analyst Susan Kilsby said.

Fonterra's current farmgate milk price stands at $4.25 a kg of milksolids - short of DairyNZ's $5.05 per kg estimated break even point.


Physical dairy market prices have strengthened considerably after the last two very strong GlobalyDairyTrade (GDT) events.

At last week's auction, the GDT Price index gained 12.7 per cent, driven mostly by double digit gains in whole milk powder and butter milk powder.

Whole milk powder prices - which have the biggest bearing on Fonterra's farm gate milk price - rose by a whopping 18.9 per cent to US$2695 a tonne - suggesting the market was well on the way towards hitting US$3000/tonne.

In today's futures session, whole milk prices took a breather - but remained above the key US$3000 level.

The January contract was at US$3010, down US$40, February was at $3040, down US$45 and March was US$3050, down US$50.

"The wholemilk powder market appears unsure of the short-term direction," Nigel Brunel at OM Financial said in a commentary.

"Given we have risen from $2360 in the January contract to $3050 today, it's no surprise the market is tentative at these prices," he said.

The new milk price futures contract - an instrument built for farmers to offset their farmgate milk price risk - closed unchanged at NZ$5.10 per kg/ms.

The strength in the futures market has come just as New Zealand production starts to ramp up to its seasonal peak over the October, November and December.

Globally, growth in milk supply continues to moderate, most notably out of Europe but in the Southern Hemisphere as well.

There have also been encouraging signs of renewed demand from China - the world's biggest dairy importer.