Fonterra has kept its forecast farmgate milk payout steady at $4.25 a kilo of milk solids. Rural economist Con Williams says farmers have made progress in minimising the pain of lower prices.

Dairy analysts say Fonterra's announcement of a lift in its forecast earnings per share range for the 2017 financial year of 50 to 60c, from 45-55c, is a sign its value-add strategy might be starting to pay off.

The forecast farmgate milk price has been maintained at $4.25 per kilogram of milksolids (kgMS), making the total payout available to farmers in the 2016-17 season $4.75 to $4.85.

Federated Farmers dairy group chairman Andrew Hoggard said it was good news for farmers who had been anxiously the announcement.

Fonterra has lifted its share dividend for 2017.

"Considering the thoughts of doom and gloom that have been going through everyone's minds over the weekend, this is pretty good news," he said.

"We haven't had a great run of success recently with the global dairy auction (GDT), so it's particularly good because of the challenging times worldwide, and a number of things going against us."

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The farmgate milk price takes into account only the GDT commodity value, whereas the share dividend reflects the value that is added to the milk.

ASB analyst Nathan Penny said it was a positive sign and some of the changes the co-operative had made looked as though they were starting to bear fruit.

In the medium term prices would probably climb, as production continued to ease in most countries.

Fonterra agreed, with New Zealand milk collection predicted to be down by 3 per cent this season.

Fonterra chairman John Wilson said the solid forecast earnings per share range reflected performance improvements across the business.

"The co-operative is aware of how tough the situation on farm remains. We are focused on delivering as much cash as possible to our farmers by bringing payments forward while maintaining a strong balance sheet. This forecast is our best estimate at this early stage of the season. We will continue to update our farmers as we move through the season."

Last August Fonterra lowered its farmgate milk price for 2015-16 to $3.85 a kg of milksolids, down from its previous forecast of $5.25 a kg.

Wilson said the $4.25 farmgate milk price this season reflected the continuing global uncertainty and the high NZD/USD exchange rate which continued to hamper the competitiveness of New Zealand dairy exports.

Recently the euro had weakened but the New Zealand dollar continued to remain strong, giving a price advantage for European export dairy products.

Chief executive Theo Spierings said the returns from the ingredients, consumer and foodservice businesses continued to grow in line with Fonterra's business strategy to convert more milk into higher returning products.

"We now have more flexibility to make the right products at the least cost, delivering better returns for our farmers' milk.

"Our good progress in continuing to increase value through our consumer and foodservice businesses, particularly in important markets such as China, Malaysia, Indonesia, Sri Lanka, Oceania and Latin America, is reflected in the lift in the earnings per share forecast," Spierings said.

Labour's Primary Industries spokesman Damien O'Connor sounded a note of caution, saying the forecast payout was ambitious and based on a low New Zealand dollar.

"Fonterra is challenged over holding on to its suppliers and this announcement aims to do that," O'Connor said.

He cast doubt on whether the value add strategy was working, especially after the news of its China partner Beingmate's forecast profit loss for 2016-17.

Penny predicted the next Fonterra forecast might be made when it announced its financial results in late September.