The industry body Dairy NZ says the increase in Fonterra's forecast payout to dairy farmers should cover some of the cost of buying in extra feed because of the drought.
On Wednesday the dairy co-operative lifted its forecast farmgate milk price for the current season by 30 cents to $5.80 a kilogram of milk solids, with a dividend of 32 cents a share on top of that.
Farmers say that increase won't be enough to cover the costs of many struggling with drought.
Dairy NZ says milk production is down for the majority of the North Island regions by about 30% because of the dry weather.
On top of that loss, says its chief executive Tim Mackle, buying in feed because of the drought has been financially tough on many farmers.
With climate scientists predicting droughts to become part of the normal for the future, Mr Mackle says dairy farmers need to factor this in with their forward planning.