Fonterra said today it was lifting its forecast payout for the 2005/06 season to $4.07 per kilogram of milksolids.
In December, the giant dairy co-operative said it was sticking with a $4/kg forecast payout.
Chairman Henry van der Heyden said a drive to reduce costs coupled with the recent fallin the New Zealand dollar were behind the raised forecast.
"The dollar's decline has come later in the season than we would have liked, but the current prevailing exchange rate will give some small relief in our average exchange rate for the full year," he said.
He said the final payout for the year could still be influenced either way by further significant movements in the US exchange against the kiwi dollar.
The kiwi has fallen to US61.10c from more than US71c in December.
Mr van der Heyden said today's forecast was a good one given the slight easing in commodity prices, the high exchange rate that prevailed earlier in the season and the fact that production would be almost 2 per cent below budget as a result of "the mixed bag of climatic conditions across the country".
He assured farmers the drive to cut costs would continue.
"I know this will be welcomed by farmers who are facing higher on-farm costs and tight budgets."
Mr van der Heyden reminded farmers doing their budget planning that changes to Fonterra's capital structure agreed last year included a one-off transitional assistance payment of 10c per kg.
