Double-digit March milk bubble?

For the season, milk flow continues at about 6% ahead of the prior season to date despite dry conditions emerging in some regions, the bank says in its Agribusiness Monthly for Australia and New Zealand.

Globally milk supply from the main exporting nations also continues to pick up pace, says Rabobank.

"Producers in most regions are beginning to see the benefit of improved farmgate milk prices, lower purchased feed costs and mostly good climate conditions," the report says.

"Attention over the next few months will be on the strength of the Northern Hemisphere seasonal peak as it will play a key determinant in the market balance.

"Right now the global dairy commodity market remains firm and in many regions inventory levels are tight. The market continues to remain well supported by ongoing strong Chinese purchasing."

Rabobank says in New Zealand the added incentive for higher production came Fonterra increased the forecast 2013/14 milk price by NZ 35c/kgMS to $8.65/kgMS.

"Processors will now be looking to the end of season and the need to balance ongoing customer requirements through June and July when milk flows largely cease," it says.

Australian milk production is up 3.1% in the season to date, with improving seasonal conditions allowing producers to begin to make up the lost ground through the first half of the season.