Westpac is tipping that Fonterra will lift the mid-point of its milk price forecast range for the current season to $7.90/kg from $7.60/kg, despite a slight dip in prices at the latest Global Dairy Trade auction.
Prices have trodden water at healthy levels over the last four auctions.
"With strong prices over recent auctions, in the week ahead we expect Fonterra to lift and narrow its 2020/21 milk price forecast range towards our forecast of $7.90/kg," Westpac senior agri economist Nathan Penny said.
"We also expect Fonterra to announce a healthy opening 2021/22 season milk price forecast midpoint with something comfortably north of $7.00/kg," he said in a commentary.
Fonterra will release its third-quarter business update next Wednesday.
This morning's result GDT auction - the last for the 2020-21 season - saw prices overall edge down by 0.2 per cent, continuing the sideways trend of the last few auctions.
Both overall and whole milk powder prices have recorded movements in either direction of less than 1 per cent over the last four auctions.
Penny pointed out that whole milk powder prices are now 54 per cent higher than at the same auction a year ago.
They are also currently over a third above their five-year average.
Westpac expects an $8.00/kg milk price in the 2021/22 season and ASB has lifted its season-ahead forecast to $8.20/kg.
For the current season, which ends on May 31, Fonterra's forecast range is $7.30/kg to $7.90/kg range, with a $7.60 mid-point - off which farmers are paid.
At this morning's auction, whole milk powder - which has the biggest influence on Fonterra's farmgate milk price - was also down by 0.2 per cent to an average US$4123/tonne.
Skim milk powder - Fonterra's second-biggest reference product - lifted 0.7 per cent to an average US$3447/tonne.
Butter prices fell 2.2 per cent to US$4929/tonne and anhydrous milk fat eased 0.1 per cent to US$5730/tonne.
ASB Bank said the fact that prices were holding on to their gains had made the bank "increasingly bullish" about the next season.
"We always felt the odds were against a sharp correction in prices after March's mammoth auction, but the resilience in prices has exceeded our expectations," ASB economist Nathaniel Keall said in a report.
"Consequently, we've changed our view and now forecast a farmgate milk price of $8.20/kg for 21/22 - up 70 cents from the bank's previous forecast."
An $8.20 milk price would be the second-best result on record. The highest - $8.40 - was paid in the 2013-14 season.
However, ASB has stuck to its $7.60/kg forecast for the current season.
"It's late in the day now, and something pretty dramatic would need to happen for us to make a change here," Keall said.
Mike McIntyre, head of derivatives at Jarden, said the futures market had again picked a significant increase in prices, which did not eventuate - a trend seen in each of the past three to four events.
"That said, a flat result with a four handle (US$4,000 for whole milk powder) sets us up nicely for the new season that kicks off in a couple of weeks' time," he said.
McIntyre said attention will now turn to the opening forecast of the 2021/22 season, and what could happen in the next couple of months when New Zealand hits its seasonal low point, which coincides with a pinch point for supply chains globally.