Conditions for a new dairy price cycle have begun to emerge, with the key implication initially being higher prices, ASB senior rural economist Nathan Penny says.
Global dairy supply was tightening and there was little backstop in terms of stocks.
ASB saw upside to its 2018-19 milk price forecast of $6.25 and has set its 2019-20 forecast at a bullish $7.
Prices at this week's GlobalDairyTrade auction increased for the sixth consecutive time, although less than signalled by futures markets, and the overall price index was up 0.9 per cent.
Since spring 2016, global prices had traded within a relatively narrow range.