Fonterra has announced today it has increased its 2016/17 forecast Farmgate Milk Price by 50 cents to $5.25 per kgMS.

Combined with the forecast earnings of 50 to 60 cents per share range for the 2017 financial year, the total payout available to farmers this season is forecast to be $5.75 to $5.85 before retentions.

File Photo.

Fonterra chairman John Wilson says since the cooperative 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. Milk production in the EU for 2016 is beginning to flatten out and our New Zealand milk collection is currently more than 3 per cent lower than last season.”

John says while the co-op has seen some improvement in GDT auction prices recently, the high NZD/USD exchange rate is offsetting some of these gains.

'There is still volatility in global dairy markets and we will continue to keep our forecast updated for our farmers over the coming months.”