Fonterra has revised its forecast payout range for the 2012/13 season to $5.90-$6 per kg of milksolids, up 25c per kg compared with the previous forecast, reflecting a recovery in dairy prices that has taken place since May.
The revised payout means an extra $400 million will be injected into the economy for the season, compared with the previous forecast.
The payout includes a farmgate milk price of $5.50 per kg, also up 25c on the previous forecast.
The co-operative forecast a net profit after tax of 40-50 cents per share, consistent with the recent Fonterra Shareholders' Fund offer prospectus. More importantly, farmers will receive a 40c per kg increase in their advance rate payments - which they receive monthly.
Chairman Sir Henry van der Heyden said the board had considered shareholders' cash flow requirements and the improved strength of the balance sheet after last month's successful launch of Trading Among Farmers, before lifting the advanced payment.
Between August 1 and the most recent dairy auction, prices have increased by an average 17.7 per cent. Last week's drop in prices did not change the co-operative's commodity price forecasts.
Chief executive Theo Spierings said a strong balance sheet meant that, from a cash flow point of view, the co-operative was in a position to increase payments to farmers over the next few months.
Spierings said there had been a persistent, serious drought in the United States which had pushed up the price of grain, and which had affected dairy production. There were also concerns about drought in the Ukraine and Russia. In South America, extreme wetness in parts of Brazil and Argentina could also depress wheat production.
"Given current global conditions, our forecasting anticipates global dairy prices are likely to move higher in the first half of 2013."