Slowing milk production in the northern half of the world has led to the second highest price rise in 14 months in the GlobalDairyTrade auction conducted by Fonterra of New Zealand.
Prices rose last week by 3.5% on average, despite growth in volumes of product for sale. Buyers paid 3.5% more for whole milk powder.
Analysts say the price trend may be driven by high US prices, which are rising due to that production region’s slowing growth in the face of a feed costs outlook described as "almost intolerable".
The supply slowdown has pushed US prices, particularly of butter and cheese, above international prices.
Dairy output is also slowing in parts of Europe — which is the reason suspected for last week’s improvement in milk prices in Northern Ireland.
Prices rose by more than 2p/litre at United Dairy Farmers’ latest auction.
But the 38m litres of milk auctioned for August delivery is 11% less than the same time last year, due to the bad weather reducing milk production across the UK and Ireland.
United Dairy Farmers chief executive David Dobbin said international dairy markets were still fragile.
"However, a combination of drought in the US and Russia, high feed costs, and very wet weather in north-west Europe is starting to impact on global milk supply," he said.
"Providing there are no unforeseen circumstances, we expect to see auction prices edge up in the months ahead as local milk supplies reduce further."
Weather trends have left only dairy production in New Zealand and Australia untouched.
The milk production season is starting down under, just as New Zealand pasture potential eases due to limited sunlight, and low temperatures on South Island.
If this trend continues, global dairy product supply concerns — and prices — will rise.
But it is very difficult for dairy farmers to look confidently to the future when their income has taken a quadruple whammy from price cuts, low constituents, fodder shortages, and rising input costs, said IFA national dairy committee chairman Kevin Kiersey.
"Co-ops must urgently announce an end to any further price cuts for 2012. And as global milk supplies come back into balance with solid demand, and commodity prices continue to recover, they must start planning for the earliest possible price improvements," he said.
Speaking at the first in a series of IFA regional dairy meetings, he also urged co-ops to present their plans to purchase, process, and sell the milk and secure the livelihoods of their suppliers after 2015.
"For the longer term, I believe there are very positive opportunities for Irish dairy farmers on global markets.
"Co-ops must support their suppliers in the short term through the current horrendous times.
Methods need to be developed to help farmers manage a growing business through highs and lows of price and margin volatility.
"To build confidence, co-ops must also convince farmers of their ability, in the long term, to deliver viable milk prices and offer farmers opportunities to confidently grow to supply fast rising global demand for dairy products," Mr Kiersey said.
"The Irish dairy sector has a positive story to tell. It has the scope to deliver significant value in extra jobs and revenue for the Irish economy.
But this tremendous extra value can only be delivered if farmers are confident of being able to grow their production profitably," he added.