International dairy prices have shown tentative signs of bottoming out.
Prices at Fonterra's latest internet globalDairyTrade, held on Tuesday night, reversed eight months of falls by rising 16.6% compared with February's sale.
The average price for whole milk powder across the sale was $NZ4316 a tonne and ranged from $NZ4200 to $4560 a tonne.
This compared with a peak of $9000 in July last year and a low of about $3800 in February.
Fonterra's managing director of global trade, Kelvin Wickham, has been saying for several weeks that prices appeared to be turning due to falling supply and low stocks, but he expected prices to "bounce around a bit at the bottom of the trough".
The trend with spot prices for milk powder indicated that was happening, he said.
Compared with December 2008, January spot prices rose 1% then fell 8% in February before rising a further 15% this month.
Overall, prices were 6% to 7% up on those in December.
"It's moving around and that is the indication for the near-term."
Tuesday night's globalDairyTrade event was for milk powder to be supplied from May to December and Mr Wickham said the lift in prices indicated customers were starting to see world supplies falling due to lower milk prices, reaction to the New Zealand dairy season coming to an end and that most product this year was already committed for sale.
Prices were also reacting to the fact the European Union had not subsidised dairy exports to the extent initially feared.
World prices initially softened in January following the EU announcement, but Mr Wickham said they had since firmed.
Stocks of dairy products were starting to run down, forcing many customers to buy again, but also underpinning improved prices was an expectation demand would start to pick up in the second half of the year.
The market was likely to rebalance as surplus milk powder in the United States and butter stocks in Europe were run down, which he said indicated prices could firm in the latter half of 2009.
Mr Wickham warned there were clouds on the horizon.
Questions remained about the EU and whether it would increase export subsidies for dairy products and whether consumer confidence would recover.
"It's [the recovery] still very fragile. I wouldn't be surprised if it [the market] continued to bounce around for a bit longer."
