A good start

While the banks are forecasting between $8.35 to $8.40/kgMS, Fonterra later this week, its forecast range for the season starting June 1.

Last week's GDT delivered good news: while the price index rose 3.3%, Chinese buyers returned after pulling back in the earlier May auction. Also, whole milk powder prices rose 2.9% to US$3,408/metric tonne.

Westpac chief economist Kelly Eckhold noted that auction was "another very strong one with gains across the board".

"All categories rose and wrong-footed futures markets, which again saw a much flatter result," says Eckhold.

"Chinese buyers returned this time after pulling back in the early May auction. Overall prices are now 10 per cent or so above their long-term averages. We can certainly see upside risk building to our milk price forecast of $8.40/kgMS for the 2024/25 season."

ASB senior economist Chris Tennent-Brown believes farmers can hope for a farmgate milk price in the top half of Fonterra's guidance range ($7.50-$8.10/kgMS) this year.

"We remain comfortable with our $8.35/kgMS forecast."