THE outlook for dairy has improved, but there are still concerns about the global economy and farmers must remain cautious.
NAB southern and western head of agribusiness Neil Findlay said NAB expects Australian dairy prices to increase by 10 per cent this season based on strong demand from key overseas buyers, firm domestic demand and stable production.
However, he said the global financial crisis still existed and warned caution with budgets.
ANZ dairy specialist Graeme Ferrier said milk companies were currently selling export product four to six months ahead, locking in the prices for spring production.
He said the short-term global economic uncertainty could mean milk production would not lift in Australia, but this could also be the case in other major export countries such as the US and EU.
On the other hand, another industry source has warned milk prices could "ease" over the coming months.
"The milk price has lifted, but the lift appears to have none of the underlying strengths or factors supporting the last significant lift in price," the source said.
Comparing this price lift to global circumstances two years ago when prices where higher, the source was concerned demand for product may not be as strong once Australia and New Zealand hit peak production in spring and this, combined with high dairy substitute prices, could be a potential danger for prices.
