New Zealand's largest company has set its opening forecast before retentions for the 2013/14 season at $7 per kilogram of milk solids - a rise of $1.20 above the milk price forecast for this season.
In addition, a dividend payment to the 10,500 farmers will be decided when the company sets its budget in July.
Fonterra has confirmed its payout for the season just ended at $6.12, comprising $5.80 per kilogram of milk solids and a dividend of 32 cents a share.
Global dairy prices have climbed in recent months as the drought cut back dairy production in New Zealand in the first quarter of the year.
Supply is also slowing globally due to unfavourable weather conditions in Europe, while production growth is modest in America.
BNZ economist Doug Steel says if an expected production boost from farmers expanding their operations and extra conversions are included, the payout could jump to $2.7 billion or 1.25% of GDP.
Mr Steel says the increase raises the possibility that the Reserve Bank may start lifting the official cash rate from its record low of 2.5% as early as the end of the year.
