Fonterra's first Global Dairy Trade auction of the year has resulted in the overall index rising 2.8%, the third consecutive rise of the fortnightly auction.
The overall price index gained 2.8% on the previous auction two weeks ago, the average price rising from $US2844 ($NZ4293) to $US2986 a tonne.
The mainstay whole milk powder product rose 1.2% to $US2705 a tonne.
Federated Farmers Otago dairy chairman Mathew Korteweg was pleased with the index's third consecutive gain.
"There's always some sense of relief anytime there's a plus sign in front of the GDT auction," he said, given the "turbulence" of the past three years.
While many Otago farmers initially made the most of good early spring growing conditions, November's rains and floods in some areas meant some of that fodder would be being fed out now.
Many farmers, especially those around the Taieri hard hit by flooding, would see their production down and be late in getting winter crops sown, he said.
"A bigger percentage of crops went in later than usual ... but growth [from now] should be OK," he said.
In early December Fonterra again lowered its forecast farm-gate payout for the 2019 season, from $6.25-$6.50 per kilogram of milk solids to $6-$6.30, largely in line with predictions of economists from the ASB, ANZ and BNZ at the time.
Mr Korteweg, who farms near Kaitangata in South Otago, said he was not surprised by the price downgrade as several small downgrades during the season were of more benefit and "transparent" for dairy farmers, than coping with "one large drop" at season's end.
"Fonterra's making an effort to be more sensible with predictions," he said.
At the time Fonterra chairman John Monaghan said the downward revision was because of the global milk supply remaining stronger than demand, which had driven the dairy trade auctions downward since May.
While maintaining forecast collection in New Zealand at 1.55 billion kilograms of milk solids, he noted it was likely the country would see an abnormal El Nino weather pattern during summer which could impact on farmers' milk production.
Mr Korteweg said it was still too early to predict if drought would hit, but he expected the weather to continue to get drier in the short term.
NZX dairy analyst Robert Gibson said in a note that prices had increased across the board at the latest Global Dairy Trade auction, partially because of a decline in offer volumes for all commodities, BusinessDesk reported.
"Leading into this event whole milk powder offer volumes were down 22% on the previous event, while skim milk powder offer volumes were down 28% on the previous event," Mr Gibson said.
Buttermilk powder jumped 9.3% to $US3252 a tonne, while skim milk powder rallied 7.9% to $US2201 a tonne.
Butter increased 3.9% to $US4076 a tonne, while anhydrous milk fat gained 3.9% to $US5137 a tonne.
Cheddar rose 3.2% to $US3371 a tonne, while lactose advanced 1.6% to $US948 a tonne, and rennet casein added 1.3% to $US5123 a tonne. For sweet whey powder, no product was offered or sold. - Additional reporting: BusinessDesk