Optimism is lifting in the dairy industry, with three companies raising their milk prices in the past two weeks.

UDV president Doug Chant said the recent decision by three companies to increase prices for dairy farmers was good news and provided continuing evidence of the strong demand for dairy products, especially in export markets.

"The announcement will give dairy farmers confidence in the underlying strength of the dairy industry," Mr Chant said.

"The step-ups will not only help dairy farmers financially, but the benefits will flow onto local dairy communities."

Mr Chant said further step-ups were needed in the future.

Farm consultant Ian Gibb said three factors were important in driving profit on dairy farms: milk price, operating costs and interest rates.

"Two out of the three are favourable at the moment, although there is some doubt about the third," Mr Gibb said.

He said the industry had taken an enormous drop during the drought with the double effect of lower production with lower milk prices.

There was still some uncertainty about one of the cost factors, water, with long-term availability and price being a concern.

Recently elected UDV central councillor Yvonne Crawford from Harston said she had noticed a change in people's perceptions at the Warrnambool UDV conference, with an expectation that farmers were beginning to get more value for their milk.

Mrs Crawford said there appeared to be more competition between the factories for milk, which was a healthy thing for the industry.

However, she said farmers were operating with higher than normal debt due to the drought.

Mrs Crawford said the dry had delayed farm investment which meant farmers were using older equipment and infrastructure which was not as reliable and not as efficient.

Bonlac Foods recently announced it had increased the price it pays suppliers for milk for the current season by 20¢ /kg butterfat and 48¢ /kg protein.

Bonlac chairman Noel Campbell said the milk price increase reflected both seasonal conditions and firm commodity prices.

"Commodity prices are still remaining firm at this point in time and current indications continue to suggest that this position will hold and continue into the 2005-06 season."

Tatura Milk managing director Jeff Martin said its latest step-up was the sixth for the year.

The base price for choice and premium milk supplied was increased by 10¢ /kg butterfat and 25¢ /kg protein beginning the first 10-day period of April.

This step-up will be paid half as cash and half as shares, regardless of the individual dairy farmer's share alignment.

"This step-up reflects our continued assessment of this season's improved returns from the market," Mr Martin said.

Nestle also recently announced milk price step-ups for its suppliers.

n Dairy farmers are being encouraged to focus on profit rather than just milk price in a series of workshops to be held around the region. See page 7 of today's Country News.

editor@countrynews.com.au