But a weaker US dollar is undermining some of the gains.
The Global Dairy Trade price index was up 2.2 per cent on Tuesday, led by big gains in butter milk powder (up 9.1pc) and butter (up 8.4pc).
Westpac NZ senior agri economist Nathan Penny said the overall GDT result pointed to global dairy demand remaining relatively firm despite the impact of COVID-19.
“Importantly, whole milk powder prices topped the key psychological barrier of $US3000/tonne overnight for the first time since August, indicating a degree of confidence in the market,” he said.
The rise was also encouraging as NZ production was hitting its seasonal peak, which recent data was suggesting had started strongly.
NZ bank ABS economist Nathaniel Keall said the GDT gains increased confidence in its forecast NZ farmgate milk price of $NZ6.75 a kilogram milk solids.
He said although volumes were picking up – as they normally did at this time of year – they were still not as high as a year ago.
Fonterra had reduced the amount of butter sold at auction as it increased sales through other channels.
But the bank’s commodity price index has been weaker because of changes in the NZ dollar.
“With the US election a matter of weeks away (and plunged into disarray after the news President Trump has contracted the virus), we can probably expect our index to bounce around a bit over the following month off the back of some likely volatility,” he said.
Australian analyst Freshagenda’s dairy export index also decreased this week on the back of the stronger Australian dollar.
Freshagenda said spot quotes from Australasian exporters showed a lift in butter prices and skim milk powder, but cheddar was weaker, while whole milk powder was unchanged.
The Australian dollar rose against the US dollar, with the increased political uncertainty in the US, it said.
The combined impact of these factors pruned 4.4 points from Freshagenda’s index, which now stood at 201.5.
Its weekly spot commodity milk value (CMV) for southern Australian dairy manufacturers fell 20 cents to $5.26/kg MS.
