Exchange rate no threat to milk price now

"All other things being equal, a stronger Australian dollar is not good but a lot of it depends on why it's strong," Ms Bills said.

"At the moment, the Aussie dollar is getting stronger because the US dollar is getting weaker.

"It's getting weaker against our competitors' and our customers' currencies as well."

International dairy commodities are traded in US dollars, which makes Australian milk prices highly sensitive to currency movements.

"It's more about US dollar weakness right now rather than Aussie dollar strength," Ms Bills said.

There was, however, one factor influencing the currency that was worth watching, she said.

"If we've got strong demand from China for iron ore because they're wanting to get their economy going with infrastructure works and need more steel, that has the potential to push our currency up further than our competitors' and customers' currencies," she said.

The Australian dollar has been worth at least US70 cents since July 14 and both Westpac and National Australia Bank forecast it will remain over that threshold for at least the rest of the financial year.

Global Dairy Trade auction results released on Wednesday showed the butter index down 2.8 per cent, cheddar down 5.3pc, skim milk powder down 4.6pc and whole milk powder falling 7.5pc off the back of sharp rises in the previous auction.

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