Dairy Australia said on Thursday that there would likely be a 10 to 15 per cent increase in milk prices in 2013. The announcement spells good news for Australian farmers, but represents bad news for consumers.

Current price for milk solids are from $4.30 to $5 a kilogramme, which would mean it could go up to $5.50.

Australian dairy farmers had complained recently that the price war between the two giant supermarket chains in the country has affected their income since the are forced to sell their milk to Coles and Woolsworth at lower prices for the two grocers to maintain their $1 a litre promo.

The news is expected to boost the confidence of Aussie dairy farmers who have expressed pessimism for the industry based on a 43 per cent confidence level, the lowest registered in the past 10 years.

Norman Repacholi, a commercial analyst with Dairy Australia, said that despite the negative outlook, Aussie farmers have reason to be optimistic about prices because of the slowdown in the strength of the country's currency and production recovery following recent rainfall in New Zealand.

From a global perspective, there is a tight supply of dairy product, causing the price of whole milk power to go up to record high levels in online auction platform Global Dairy Trade, following a scramble among buyers to secure stocks.

Milk production in the US is forecast to rise 0.7 per cent, but the US exports only 15 per cent of the 100 billion litres of milk it produces yearly.

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