ASB senior economist Chris Tennent-Brown said the auction gain had moved the bank's forecast in the right direction for a milk price of $5 a kilogram of milksolids at the end of the season.
Fonterra last month raised its milk price forecast from $4.25kgMS to $4.75kgMS, but DairyNZ's estimate of break-even for dairy farmers is $5.05kgMS.
Interviewed before the auction, Northland Federated Farmers dairy section chairman Ashley Cullen, of Maungaturoto, said it would be nice if the milk price kept lifting, but he wanted a slow and steady rise rather than a rush, which could cause complications such as pressure on the NZ dollar.
His 2014 herd of 200 cows had been culled to 170, which Mr Cullen said was probably a good thing as it had got rid of "dregs".
"We've also stopped rearing every heifer calf and now rear only the elite animals, so there's less pressure on the runoff," he said.
His bank balance had "taken a hiding" over the past two years and if the milk price increased he and other dairy farmers who had taken on debt to survive would have to repay their loans.
"And once the milk payout is over $6 the repayment of loans from Fonterra will kick in."
Mr Cullen said he had formerly used quite a bit of palm kernel, but now fed his cows home-grown maize and silage and was improving his pastures.
Mata dairy farmer Bruce Paton said the possibility of an increased payout was a positive sign, particularly at this stressful time of the year when cows were calving.
An improved price would give farmers the opportunity to apply urea and be more aggressive with supplements.
Many dairy farmers had taken fertiliser out of their budgets to get through the past two years, but that policy could not go on forever.
Mr Paton had laid off farm staff and spread their work over remaining staff to get by since 2014, but that move was causing some staff fatigue.
Hokianga beef and dairy farmer Les King said four of his five farm staff had been laid off and he was working 24/7 "just to survive".
"It's pretty tough out there. We've got a forestry operation as well as a beef block so we will see it through, but if we were just dairying we'd be in real trouble," he said.
"People with big herds have been caught the most. Their milk is worthless, the banks want them to sell their farms but no one is buying so they have to keep farming on."
Meanwhile, DairyNZ has published the budgets of 20 dairy farmers with low production costs so others can learn from their examples.
The sole Northland farmer among the budget studies milks 730 cows on 231ha (effective) at Awanui.
Five permanent staff are employed milking cows through a 40-a-side herringbone and for 2016/17 the farmer is budgeting on producing 292,000kgMS, 400 KgMS/cow and 3.16 cows/ha, with about 900kg/cow of palm kernel being fed.
Gross farm revenue for the year is forecast at $1,190,441, with dairy operating expenses $1,045,980 and operating profit of $144,461.
- See the budget studies on dairynz.co.nz/tactics
