Dairy prices rose sharply overnight in the latest Global Dairy Trade event.
Overall prices were up 8.3 percent, with an average price of US$3197 per metric tonne (MT) on Wednesday.
The higher prices were driven by a 14 percent increase in whole milk powder (WMP), which climbed to US$3208/MT.
Prices for butter were up 3 percent, to US$3717/MT, while buttermilk powder rose 3.8 percent to US$2417/MT and cheddar was up 3.3 percent to US$3762.
Lactose rose 1.0 percent to US$1309/MT and skim milk powder increased by 3.5 percent to US$2694/MT.
Anhydrous milk fat was down 0.2 percent to US$3981.
ASB called the higher WMP prices "a really encouraging sign".
The bank previously forecast a 2020/21 milk price forecast of $6.50/kg, with a long run forecast range of $6.50-$7.50, saying it was "concerned about downside risks".
"Recent price movements and today's outsized gains flip the risks around," the bank said in its weekly commodity report on Wednesday.
"The price gains, if sustained, will boost the milk price for the 20/21 season. Our 20/21 forecast is under review and will be updated after the next event in a fortnight. We'll be looking for how much of the latest lift is sustained."
In May, Fonterra announced a milk price forecast range of $5.40-$6.90 kg.