Dairy prices saw a 2.1 per cent increase in the latest GlobalDairyTrade auction, largely unwinding the 2.9 per cent loss in the previous one.

At the auction, whole milk powder prices lifted 1.5 per cent, skim milk powder prices were flat, +0.1 per cent, while cheese prices jumped 10.5 per cent.

Westpac senior economist, Anne Boniface, said unusually, while the lift in dairy prices was broadly in line with futures market pricing, the New Zealand dollar is still reacting, rising around a third of a cent against the US dollar.

Although last night’s lift was small, Boniface said, any improvement in prices will no doubt be welcomed by the embattled dairy sector.

“However, while there are a few straws in the wind suggesting that the pace of growth in production in Europe has eased a touch in recent months and sentiment in commodity markets has noticeably improved in recent weeks, a substantive recovery in prices is likely to be some way off yet,” she said.

“We expect prices to continue to bump around near current levels, before gradually grinding higher late from late 2016 as global supply growth moderates and demand improves.”