This brings the average farmgate milk price for the 2017-18 season to price to $5.50 per kilogram of milk solids.

With Fonterra’s additional payment of 40 cents per kilogram of milk solids, payable on top of the revised farmgate price, the total average cash paid is $5.90 per kilogram of milk solids.

The average cash payment is based on forecast closing range of between $5.90 and $6.20 per kilogram of milk solids.

This 20 cent increase will be paid on August 15.

Improved market conditions and the strength of the Australian business supported this step up, Fonterra Australia managing director René Dedoncker said.

“Since the start of this season our milk pool has grown, and our assets are nearing optimal capacity,” Mr Dedoncker said.

“Coupled with strong demand from Fonterra’s Australian and global customers, this has enabled us to deliver this step up to our farmers.

“This price increase will improve cashflow positions on farm, reinforcing growing confidence of our farmers,” he said.

Fonterra updated its forecast closing milk price range to between $5.50 and $5.80 per kilogram of milk solids, but said a rally in the Australian dollar was likely to influence the end of season milk price.

“We continue to monitor currency movements closely and will keep our farmers updated throughout the season with the latest market conditions,” Mr Dedoncker said.

When introducing its farmgate milk price forecast for the 2017-18 season in May, Fonterra announced a range of between $5.30 and $5.70 per kilogram of milk solids, which has now been revised up.

The additional 40 cents per kilogram of milk solids payment was paid to current, retired and recommencing Fonterra suppliers.