While that was still below break-even for many farmers, the increase came as welcome relief for those struggling in the sector.
North Otago Federated Farmers president Richard Strowger said it was ''going in the right direction''.
''It doesn't fix the problem but it's slowed the bleeding down a bit,'' he said.
Mr Strowger, who is also a farm consultant, said farmers still needed to keep their costs down.
Those he had spoken to were affected in different ways.
Some acknowledged they could not control the situation and were ''putting their heads down and doing what they can'' while others were very quiet - ''and you know they are hurting and there's a bit of despair'', while some did not know if they would survive.
''There will be casualties out of this and some of those casualties won't be now ... people are treading water and slowly going under,'' he said.
Five Forks dairy farmer Lyndon Strang was delighted with the revision, saying it was positive news and would make a ''huge difference''.
Fonterra chairman John Wilson said more than 7000 applications had been received for the interest-free loan announced last month to help farmers through the tough times, representing about 70% of Fonterra farmer shareholders.
Fonterra yesterday released its annual financial results, which showed an improved second-half performance, with overall net profit after tax up 183% from $179million to $506million.
ASB chief economist Nick Tuffley said farmers would still be under cashflow pressure for the rest of the season but some of that would ease if the higher forecast milk prices translated into higher advance payments made to farmers over the season.
A New Zealand production squeeze was a key reason why traded dairy prices had risen and why the bank expected they would continue to rise.
Fonterra expected milk production to be down more than 5% for the season as farmers responded to the tough conditions.
Cow numbers were down, fewer supplements were being fed and some areas were experiencing challenging weather conditions.
ANZ rural economist Con Williams said there was a wide range of possible outcomes for the season's milk price, as there was still extreme volatility in dairy markets.
NZX futures prices indicated powder prices could push through $US3000 a tonne, which would lift the milk price back into the low $5 range if sustained.
But ANZ remained more cautious, holding its $4.25-$4.50 forecast.
Fonterra confirmed its final payout for last season of $4.65, made up of a $4.40 milk price and 25c dividend, a far cry from the previous season's payout of $8.50.
Fonterra Shareholders Council chairman Duncan Coull said it was a disappointing result for farmers, with the dividend at the lower end of their expectations.
But they would be ''buoyed'' by the current season's latest forecast and move forward with ''cautious optimism''.
The latest Westpac McDermott Miller regional economic survey, for the September quarter, showed dairy-intensive regions remained downbeat.
Southland and Taranaki-Manawatu-Whanganui and, to a lesser extent Otago and Waikato, were well below the national average in terms of regional economic expectations.
Southland households were the least optimistic in New Zealand about the economic outlook in their region.
Southland was home to just 2.1% of New Zealand's population, but has 10% of dairy employment.
Industry economist David Norman said unemployment had risen quite sharply in the past six months, and purchases of farm vehicles were down 8.4% in the past six months over the same period last year.