Fonterra says it has raised its 2016/17 forecast farmgate milk price by 50 cents to $5.25 per kg of milksolids.
When combined with the forecast earnings per share range for the 2017 financial year of 50 to 60 cents, the total payout available to farmers in the current season is forecast to be $5.75 to $5.85 - before retentions.
The forecast compares with DairyNZ's estimate of break-even of $5.05 per kg.
Fonterra's chairman John Wilson said that since the co-operative last reviewed its forecast Milk Price in August, global milk supply has continued to reduce and demand has remained stable.
"Milk production in key dairying regions globally is reducing in response to low milk prices," he said in a statement.
Milk production in the EU for 2016 is beginning to flatten out and New Zealand milk collection is currently more than 3 per cent lower than last season.
"While we have seen some improvement in GDT auction prices recently, the high NZD/USD exchange rate is offsetting some of these gains," he said.
Fonterra will report its annual result tomorrow.