Dairy farmers hope for payout rise

Dairy prices are tipped to rise.

Northland dairy farmers are cautiously optimistic of another leap in world dairy prices next week, one which could bump the final payout to $6 per kilogram of milk solids.

The latest increase in whole milk powder returns, up last week by 11.4 per cent at the GlobalDairyTrade auction, lifted the average price to US$3327 ($4686) per tonne.

Banks say based on the latest result, the final 2016-17 payout might reach $6 per kg of milksolids but Federated Farmers Northland dairy chairman Ashley Cullen said next week's GlobalDairyTrade auction would give a better idea of what farmers would receive.

In September, Fonterra bumped its 2016/17 forecast farm gate price by 50c to $5.25/kg of milk solids after a reduction in global milk supply and stable demand.

"There's still a lot of volatility out there although we're heading in the right direction. Until farmers see money sitting in their bank accounts, they can't be optimistic," Mr Cullen said.

"Banks are starting to talk about a $6 payout but there's a lot of debt to be repaid to get back to square one. I think if we had another lift in GDT [global dairy trade] next week, that could easily increase the payout."

Mr Cullen said the first part of the winter season had been pretty depressing with rain coupled with low dairy payout estimates.

A forecast price of $5.25/kg will bring $472.5 million into the Northland economy but a $6 payout will add $67.5 million.

Responding to predictions the final payout could hit the $6 mark, Fonterra said the current forecast of $5.25 per kg of milk solids remained its best price estimate.

A spokeswoman said if there was any update to the current forecast, the dairy giant was obliged by law to disclose it to the farmers first.

Federated Farmers last week said prices needed to hold up until the next dairy auction.

Buyers were responding to news that New Zealand and Australian production would be down, Europe was flat and only the United States was showing signs of an increase.