Global dairy prices have made the first solid gain in two months.

Dairy prices may have turned a corner but it is too early to judge based on the results of one auction, Federated Farmers says.

At the latest GlobalDairyTrade auction on Tuesday (Wednesday NZ Time), prices rose 6.6 per cent, ending a series of minimal changes.

The average price rose to US$2436 per metric tonne (FAS).

GlobalDairy trade auction price index.

Prices were unchanged on June 15 and July 19, while they dropped 0.4 per cent on July 5.

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New Zealand's major export, whole milk powder (WMP), was up 9.9 per cent, to an average price of US$2265.

"It's been painful but you hope it's the turning of a corner. There's still a lot of challenges and they won't magically go away with one GDT event. We need to see a good solid pattern of lifts to give us any certainty," Federated Farmers dairy group chairman Andrew Hoggard said.

Westpac economist Anne Boniface said the latest trade would be welcomed by farmers.

"We are gradually starting to see growth in global milk supply slow in response to the sustained period of low prices, albeit from a high level," Boniface said.

The higher prices gave the bank more confidence with its $4.60 per kilogram of milksolids forecast for this season's farmgate milk price.

This week Fonterra maintained its $4.25 per kg/MS forecast, while predicting a likely rise in the share dividend, from 45-55c to a range of 50 to 60c.

AgriHQ analyst Susan Kilsby said the strength of the GDT was able to offset the stronger New Zealand dollar, which has appreciated over the past fortnight to be back above the US$72c level.

"Dairy commodity markets are waking up to the fact that milk production is slowing across the globe," Kilsby said.

"The majority of the extra milk produced in recent years has come from Europe – but output there is now being stemmed by low returns. We are still seeing growth in the US market but that is largely being taken care of by their domestic market".

Milk prices still remain well below the cost of production. On Tuesday DairyNZ released figures showing the break-even milk income needed for the average farmer has fallen to $5.05 per kilogram of milksolids for 2016-17, compared to $5.25 last season and $5.77 the season before.

An increasing number of farmers are now using milk price futures to lock in prices, with 1070 open positions equating to 6.4 million kgMS. The September 2017 milk price futures contract – for the 2016-17 season – is currently priced at $4.50/kgMS.

At the latest GDT, skim milk powder prices were up 2.1 per cent, anhydrous milk fat rose 4.7 per cent and the butter index lifted 6.6 per cent.

The rennet casein index achieved the greatest lift in percentage terms, by 16.3 per cent. Lactose gained 3.7 per cent and the cheddar price index was down 0.8 per cent.