Dairy giant Fonterra has announced an increased milk solid price of $4.25 per kg, slightly below the $4.50 - $4.80 analysts predicted for the upcoming season.
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The new price is up 35 cents from this season's payout of $3.90 per kg for the company's farmer shareholders.
Analysts say the glut of milk on world markets, caused largely by overproduction in Europe, is expected to shrink, and demand to pick up.
Even with an improved forecast, many dairy farmers are expected to face a third consecutive season when they will struggle to break even.
After three seasons of below break-even milk prices farmers are taking on more debt and selling off assets outside the farm as well as changing farming systems to reduce costs.
AgriHQ dairy analyst Susan Kilsby said the opening payout was realistic.
"Fonterra is, even at $4.25, banking on a small lift in prices by the end of the season. But right at the moment there is still a lot of uncertainty in the market, there is still a lot of milk around, and a lot of stocks of dairy product building up, both in the EU and in the US."
Ms Kilsby said many dairy farmers needed more than $5 per kilogram of milk solids to break even.
