A MODEST price increase of 3.6 per cent for whole milk powder on Fonterra's online auction system has dairy experts hopeful the market is starting to stabilise.
The average price across all WMP contracts on globalDairyTrade last week was $US3560 a tonne, $US123/tonne higher than last month's auction.
Prices ranged from US$3370/tonne to $US3760/tonne for 25,000 tonnes of WMP, after increases of 13.7 per cent in November, 5.7 per cent in October, 24.2 per cent in September and 25.8 per cent in August.
globalDairyTrade manager Paul Grave said while prices had increased again due to tight supply conditions, the economic outlook was still "relatively fragile".
"A sustained recovery is reliant on strong consumer demand," Mr Grave said. "WMP prices have risen by 95 per cent since July.
"While the outlook remains positive, we expect more volatility as a result of supply and demand responses to this large price increase."
Dairy Australia strategy and knowledge manager, Jo Bills, said this month's modest price increase was "not a terribly bad thing".
"It's a bit simplistic to say we just want prices to go higher and higher," Ms Bills said.
"That can lead to a situation where buyers will substitute non-dairy products in their processed foods.
"We really want to get to the point where we've got a more sustainable, less volatile price."
Ms Bills said the auction results signalled "hand-to-mouth" purchasing from buyers, to avoid being left with overpriced inventories.
She said peak production season in the northern hemisphere, from March-May, would "ease the tightness in the marketplace".
The next globalDairyTrade auction is on January 5.
