Farmers supplying Oceania Dairy will get a guaranteed minimum milk payout for this season almost 17 percent more than Fonterra's forecast.
The South Canterbury-based dairy company says it will pay its suppliers $4.50 per kilogram of milk solids compared to Fonterra's $3.85/kgMS.
"We wanted to send an important signal of support and partnership to our supply farmers," said Oceania's general manager Roger Usmar.
The company, owned by China's largest dairy producer Inner Mongolia Yili Industrial Group, said it looked at ways to support its suppliers as the local dairy industry feels the effects of a global downturn.
"By providing a premium minimum guarantee, we can offer our supply farmers some certainty to their cash flow and operational planning," Mr Usmar said.
The company is investing $400 million to develop its site at Glenavy to add capacity.