Canterbury-based dairy company Synlait Milk has raised its forecast payout to farmers for the current season reflecting improving market conditions.
It has upgraded the forecast for the 2016-17 season by 25 cents to $6.25 per kilo of milk solids.
The dairy company said commodity prices had improved since last year and global production - excluding the United States - had fallen.
But it warned the industry needed to reduce stocks that were still higher than expected.
Synlait chief executive John Penno said the higher forecast was good news for its 200 milk suppliers in Canterbury.
"Our milk suppliers will soon be turning their attention to the off season and this announcement will give them confidence with their cash flow planning," he said.
Mr Penno said Synlait was grateful for the farmers' support through the tough market conditions.
The current dairy season ends in May.
Fonterra was expected to update its forecast within the next month.