Dairy product prices advanced in the latest GlobalDairyTrade auction, propelled by gains in cheddar and whole milk powder.

Before this auction, investors had eyed the prospect of further gains in prices of dairy products, given drought conditions in the South Island and dry weather in the lower North Island, after whole milk powder soared 19 percent two weeks ago.

The GDT average winning price rallied 10.1 percent to US$3,366, up from US$3,042 the previous auction. Some 22,957 tonnes of product was sold, down from 28,000 tonnes of product two weeks ago.

After the latest GDT auction, the AgriHQ Seasonal Farmgate Milk Price for the 2014-15 season rose15 cents per kilogram milksolids to $4.70/kgMS, lifting it to Fonterra's current forecast for the season.

"Fonterra's milk price forecast for the current season now looks achievable providing dairy commodity prices continue to rise through the remainder of the season at the rate currently indicated by the NZX Dairy Futures market," AgriHQ dairy analyst Susan Kilsby said in a note.

"Dairy markets continue to gain ground rapidly as buyer demand increases at a time when the volume of product available on the GDT trading platform is very low," Kilsby said. "Buyers are looking to secure purchases now as they are aware milk powder could become more expensive in the coming months."

The AgriHQ Snapshot Farmgate Milk Price indicates that if the GDT prices from the February 17 auction were achieved across the entire season this would equate to a milk price of $6.15/kgMS, a 50-cent increase from the previous auction. The recent increase in the value of the NZ dollar effectively removed 23 cents from the previous AgriHQ Snapshot Farmgate Milk Price, but this was fully mitigated by the higher GDT prices, according to Kilsby.

Cheddar jumped 16.8 percent to US$3,054 a tonne, while whole milk powder climbed 13.7 percent to US$3,272 a tonne. Anhydrous milk fat gained 6.4 percent to US$4,314 a tonne, and skim milk powder increased 5.7 percent to US$2,744 a tonne.

Butter milk powder advanced 1.9 percent to US$2,674, rennet casein rose 1.2 percent to US$8,897 a tonne, and butter added 1.1 percent to US$3,823 a tonne.

Lactose was not offered at the latest event.

Sweet whey powder was not offered, not sold, or sold at its starting price in either the current event and/or in the prior two events.

The New Zealand dollar last traded at 75.29 US cents at about 12:51pm in New York, compared with 75.01 US cents at 5pm in Wellington on Tuesday.

There were 97 winning bidders out of 167 participating bidders at the 14-round auction. The number of qualified bidders rose to 694, up from 688 at the last auction.