Today's lift in the milk price means more farmers will be 'farming in the black” this season, but for others the payout remains below the cost of production.

'This is good news and I hope it means we have come through the worst of the low payouts,” says Bay of Plenty Federated Farmers dairy chairman Steve Bailey.

Fonterra has announced a lift in milk prices today.

Fonterra Co-operative Group Limited has increased its 2016/17 forecast Farmgate Milk Price by 50 cents to $4.75 per kgMS today.

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 $5.25 to $5.35 before retentions.

Steve says the forecast lift is welcomed news and should help give banks the reassurance required to continue to support farmers.

It's a moral boost for farmers too, who have been struggling with a hard wet winter and poor returns.

Steve warns while things are looking up, the corner hasn't been completely turned yet and farmers must continue to be cautious with spending and revise their business models to ensure there is some reserve in the system.

The strength of the New Zealand dollar is impacting on returns too and Steve says that, plus the New Zealand housing market's impact on the economy and indirectly on farming, are beyond farmers' control.

'I hope when we look back we will see we have come through the trough and returns are on the rise.”

Fonterra chairman John Wilson says current global milk prices remain at unrealistically low levels, but have started to improve as global demand and supply continue to rebalance.

'Milk production is reducing in most dairying regions globally in response to low milk prices and this is bringing the world's milk supply and demand back into balance. Milk production in the EU is now in decline and our New Zealand milk collection at this early stage is around four per cent lower for the year to date.

'Prices have increased on GlobalDairyTrade but the increasing NZD/USD exchange rate continues to offset some of these gains,” says John.

'We expect the dairy market to be volatile over the coming months and will continue to keep our forecast updated for our farmers as we move into the season.”

Fonterra is required to forecast its Farmgate Milk Price every quarter under the Dairy Industry Restructuring Act (DIRA).