Dairy prices are on the up with the latest Global Dairy Trade seeing a 3.6 percent increase in the index price after three consecutive decreases since October.

Business correspondent Andrew Kelleher said farmers have responded to consecutive falling dairy prices by cutting herds and reducing supply.

He says it's likely dairy prices will continue to rise in 2016, because the milk production coming out of New Zealand is going to be lower.

Kelleher says as international markets react to the reduced supply, there's an expectation that demand will increase, and auction prices lift.

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