Fonterra's latest farmgate milk price forecast of $4.25 a kg rests on whole milk powder stabilising at around current levels and gradually improving as the season progresses.
Dairy NZ estimates the average break even price for most farmers to be $5.25 a kg.
Jon Spainhour , a broker and partner at Chicago-based dairy specialist Rice Dairy, said it was an encouraging result.
"We are not off to the races yet but I think we have seen the floor for the moment," he said.
Among the other movements, anhydrous milk fat prices were up 2.8 per cent to an average price of US$3,444 a tonne while butter prices gained 3.2 per cent to US$2762 a tonne. Cheddar prices gained 7.8 per cent to an average price of US$2669/tonne.
Dairy prices have been mixed over the last few months, GDT price index registering six falls and five gains since January.
The AgriHQ's theoretical "snapshot" milk price lifted 12c to $4.21 per kilogram due to the weaker NZ dollar. The snapshot indicates what the farmgate milk price would be if all of the season's product was sold at June 1 GDT prices and at the current exchange rate.
Susan Kilsby, AgriHQ dairy analyst, said the weaker whole milk powder price was likely to have been driven by the larger volumes on offer combined with ongoing weakness in demand. Fonterra put up 10,712 tonnes of whole milk powder - nearly twice the volume on offer at the previous event.
"Overall the dairy commodity market is currently tracking in the right direction but prices are going to take some time to recover to a level where dairy farmers can turn a profit," Kilsby said.
Milk price futures commenced trading on the NZX dairy derivatives market at the end of last week. The September 2017 contract, which relates to the 2016-17 dairy season, last traded at $4.50/kg - 25c above Fonterra's current forecast.
The September 2018 contract, for the 2017-18 season, traded at $5.60/kg.
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