Warrnambool Cheese and Butter stepped up its price on Thursday to an average $5.60 per kilogram milk solids.
The step up comprises 7 cents/kg butterfat and 14 cents/kg protein.
The payment is retrospective and applies to milk supplied from July 1.
WCB opened at $5.50/kg, in line with other leading prices.
The company said global markets continued to be relatively well balanced.
But it warned there were some signs that global milk production may be recovering in key regions including the European Union, United States and New Zealand.
"At this early stage of the season, it is not clear what impact, if any, this may have on market dynamics going forward," it said.
"Since our opening price announcement demand and trading conditions have been relatively stable across most of our products.
"The skim milk powder market remains weak and continues to be weighed down by high global inventory levels and we have also seen some strengthening of the Australian dollar.
"With these factors in mind, we maintain a cautious approach.
"We will continue to monitor the market and review the milk price again in January 2018 in accordance with our quarterly review process."
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