Last night's 10 per cent lift in Global Dairy Trade auction is good news for dairy farmers – but won't necessarily translate into a higher payout this season.

That's the view of Te Puke dairy farmer John Scrimgeour, who believes dairy prices may finally have 'turned the corner”, but says Global Dairy Trade prices are just one part of the equation.

Te Puke dairy farmer John Scrimgeour. Photo: File.

The intentional auction achieved an overall rise of 10.9 per cent, with whole milk powder in particular increasing in price by 12.1 per cent.

'Global Dairy Trade accounts for just a portion of Fonterra's business and we also don't know how the currency will impact on returns or what forward cover Fonterra has taken,” says John.

'What I believe is most encouraging is three of the last four auctions have performed exactly as predicted regarding price movements – two down and two up.

'That gives me encouragement that the marketers have a fair idea of what is happening and suggests that we have now turned the corner.”

John says he is not expecting the auctions to continue to increase by 10 per cent each time, but he also doesn't expect prices to drop significantly.

'The future now looks a lot brighter in contrast to a few weeks ago,” he adds, 'when we were wondering how much worse it could get.”

Fonterra has diverted some of the milk powder it would normally put up for auction to the manufacture of other products, and this may be having some influence on prices.

However, John says farmers shouldn't expected a lift in payout this season and should continue to budget on the $3.80 Fonterra has forecast.

'It could go up a little in autumn if things continue to improve,” John suggests.

He also expects most farmers will take up Fonterra's offer of an interest free loan, as reported via SunLive yesterday, but says as it is linked to shareholdings that excludes sharemilkers, who may need it most.

'Many farmers have a significant level of equity in their properties which they can barrow against, but for sharemilkers theirs is more of a cash-flow business,” he explains.

'Interest free money is pretty hard to resist, but there's a suggestion that fringe benefit tax may apply if some farmers share it with their share-milker.”