Canterbury dairy company Synlait Milk said its forecast milk price for the 2016/2017 of $4.50 kg of milk solids would carry a higher-than-usual advance rate for milk suppliers.

Chairman Graeme Milne said the prospect of another tough season would be slightly offset for Synlait suppliers as they would start the season in a stronger cash flow position than they were expecting.

"Cash flow is really important at this time of year and we've prioritised a significantly higher advance rate for our milk suppliers' benefit," Milne said.

The milk price compares with Fonterra's farmgate milk price forecast for 2016/7 of $4.25 a kg, on top of which will come dividend payments.


Synlait said low global commodity pricing continues to drive low milk prices and milk production in New Zealand has started to ease in response.

"Unfortunately, increasing milk production in Europe, soft demand from China and trade sanctions in place with Russia continue to be more important than reduced milk production in New Zealand," he said in a statement.

Synlait's forecast milk price for the current 2015/2016 has been revised to $3.90 kg - level with Fonterra's milk price.

Managing director and chief executive John Penno said Synlait had also adjusted payments for the current season to give suppliers better cash flow through the winter.

Synlait will announce the final milk price for the 2015 / 2016 season in late September, along with any revision to the 2016/2017 forecast milk price.