Dairy prices have signed off the year on a more positive note with a 2.4% overall lift in this week's GlobalDairyTrade auction.
It was only the fifth rise in 24 auctions during a year in which overall prices have plummeted 48%.
Whole milk powder, a key product, lifted 1.4% in contrast to a 3.2% fall in skim milk powder prices.
A decrease in whole milk powder and overall auction volumes this week, compared with the previous auction, might explain some of the price rise.
Fonterra continued to ''rein in'' auction volumes despite healthy production to date this season, ASB rural economist Nathan Penny said.
Fonterra had revised down its milk production growth forecast for this season, compared with last, from 2% to flat, citing the lower milk prices as likely to induce a lower supply response from farmers.
In particular, the co-operative expected farmers to dry off their herds this summer/autumn, as buying additional feed over the dry months would not stack up for many farmers.
Beyond this season, ASB remained ''broadly positive'' on dairy prospects. As farmers slowed production, demand was expected to firm, particularly as the Chinese economy picked up, aided by lower energy prices.
North Otago Federated Farmers dairy chairman Lyndon Strang expected ''quite a reasonable'' drop-off in milk production.
''Guys won't spend the money to make the milk,'' he said.
Hopefully, that would lead to less supply and possibly more demand and higher prices, Mr Strang said.
