International dairy prices are set for a New Year boost due to a 5-15pc drop in dairy exports from drought-affected New Zealand.
The latest quarterly dairy report from Dutch bank Rabobank has predicted that New Zealand's dairy exports will, this year, fall for the first time in two years.
Dairy market analysts at the bank said that emerging supply constraints were likely to exert significant upward pressure on international prices in the first quarter of this year.
The bank's positive price prediction was also based on strong buying from both China and Russia, which is expected to continue this year.
The most recent Fonterra global trade auction in New Zealand highlighted the improving market situation, with prices, on average, 7.1pc higher than last month's auction.
While butter prices remained stable last month, powder prices on the British, EU and world markets all improved, with the latest Dutch dairy quotations, issued on Wednesday, following the same trend.
ICMSA dairy chairman Pat McCormack said the improved Dutch prices were about 4c/l higher than current Irish prices.
Pressure is now mounting on Irish co-ops to increase milk price for last month's supplies and for the rest of this year.
IFA dairy chairman Kevin Kiersey warned that with rising feed, energy and fertiliser costs, dairy farmers would need a minimum increase of 10pc (3c/l) in this year's milk price compared to 2010 just to maintain margins.
He insisted that the strongly positive market outlook meant the Irish dairy industry should be well capable of returning the necessary higher milk prices during the next 12 months.
"We estimate feed costs, which have been on a continuously rising trend for several months, have increased by more than 15pc in 2010, with motor fuel costs up at least 13pc and fertiliser prices still rising fast in response to oil price hikes. Fuel and energy cost hikes have also impacted contractor charges," Mr Kiersey said.
He added that freezing conditions in the past two months would have increased feed and labour bills.
"The average milk production costs could rise by well over 10pc [this year]. Having just finalised our Teagasc Dairy Monitor results at home, we expect costs on our own farm to rise by up to 3c/l this year," he added.