Westland Milk, which is considering job cuts because of weaker dairy prices, has raised its forecast milk payout to farmers for this season, saying there are "some signs of increasing demand and price recovery".
The Hokitika-based company expects to pay between $4.90 and $5.30 per kilogram of milk solids for the 2015/16 year, up from an earlier forecast of between $4.60 and $5/kgMS.
The operating surplus for the previous season was $4.95/kgMS before retentions of 10 cents/kgMS.
Group revenue for the 2015 financial year fell 23 percent to $639 million, according to a statement on the company's website.
"The current market has shown some signs of increasing demand and price recovery," said chief executive Rod Quin says.
"I am confident that the global oversupply is being consumed. However, farmers in Europe and the US are yet to find a new level of milk production and farm profitability.
"There are risks that need to be considered, but also cautious optimism to balance our views of the market going forward."
Dairy product prices rose in the latest GlobalDairyTrade auction two weeks ago, climbing for a third straight auction after nearly six months of declines.