Farmers say it's premature to regard the increase in Fonterra's milk payout as an early Christmas present, as it's just a forecast at this stage.
But Federated Farmers says if it holds up, Fonterra's announcement that it's lifted the payout by 20 cents per kg of milk solids, would represent a $300 million boost to farm incomes and the economy.
It takes the forecast payout back up to $6.50 per kg.
In October, Fonterra dropped its milk price forecast by 45 cents, blaming falling world commodity prices and a strong New Zealand dollar.
But the company says the latest revision reflects a modest recovery in global dairy prices over the past two months.
Federated Farmers dairy vice-chairperson Robin Barkla says the increase would give the average dairy farmer about $22,000 more for the season.
He says a big chunk of that will probably continue to go onto debt repayment and although the forecast's pleasing, it didn't come out of the blue.
Fonterra Shareholders Council chairperson Simon Couper says farmers will be happy with the forecast increase, particularly just before Christmas.
The distributable profit range (dividends paid on shares) stays the same at 40 to 50 cents per share, giving a total forecast payout of $6.90 - $7.