Another bounce in the global dairy prices has prompted Fonterra to lift its New Zealand forecast milk price. The Global Dairy Trade price index lifted 1.6 per cent on December 5, after being flat during November. Fonterra lifted its NZ forecast farmgate milk price NZ25 cents a kilogram milk solids to $NZ7.50/kg MS on December 7. The giant dairy co-operative also announced a massive jump in profit after tax - up 85 per cent on this time last year to $NZ392 million. The price turnaround follows a disastrous start to the season, when global milk prices plummeted and Fonterra slashed its forecast farmgate price to $NZ6.75/kg MS. Fonterra chief executive officer Miles Hurrell said the revised forecast reflected recent strengthening in demand for commodity products from key importing regions. This included improvement in demand from China during the first quarter. "Global Dairy Trade prices have lifted, and our sales book is also well contracted for this time of year, giving us confidence to increase our forecast farmgate milk price," he said. "It's still early in the year, with potential for further volatility in commodity prices, so we will continue to watch market dynamics closely and provide updates as needed." GDT auction prices lifted across the board on December 5. Cheddar led the way with a 9.7pc lift, followed by lactose (up 5.3pc) and whole milk powder (up 2.1pc). Mozzarella was sold for the first time at the auction and made $US4005 a tonne. Westpac NZ senior agri economist Nathan Penny said prices were now at their highest since June. "Prices have lifted by around 18pc since this year's low in August," he said. "That said, overall prices remain 9pc down on a year ago and also 9pc below their five-year average levels." But Mr Penny warned there were still no clear signs that the Chinese economy, and thus Chinese dairy demand, had turned the corner yet. ASB economist Nat Keall was similarly cautious. Chinese demand remained comparatively muted, and lower volumes on offer at the auction were also partly behind recent gains. "With the risk of sounding like a broken record, the key headwind to further recovery in dairy prices remains the comparative absence of Chinese demand," Mr Keall said. China's buying activity was well below that of the previous two or three seasons. "While Chinese growth forecasts have recently been revised higher, output next year still looks likely to remain below the historical trend," Mr Keall said. "In our view, that's still a recipe for comparatively muted global dairy demand." Both banks are more cautious than Fonterra with ASB forecasting a price of $NZ7.35/kg MS and Westpac $NZ7.25/kg MS. Want to read more stories like this? Sign up below (select Dairy News) to receive our e-newsletter delivered fresh to your email inbox twice a week.