Synlait Milk says it will pay about $4.50 per kilogram of milk solids for the 2016/17 season, slightly higher than Fonterra's forecasted payout of $4.25.
However, Synlait has revised its current season payout down to $3.90 a kilogram, which is level with Fonterra.
Synlait Chairman Graeme Milne says the prospect of another tough season will be slightly offset for suppliers, as they will start with slightly more cash than they were expecting.
Low global commodity prices continue to drive low milk prices, and the amount of milk produced in New Zealand has started to ease in response.
"Unfortunately, increasing milk production in Europe, soft demand from China and trade sanctions in place with Russia continue to be more important than reduced milk production in New Zealand," said Mr Milne.
Synlait is a small milk producer based in Canterbury and processes about 550 million litres of milk each year.
In comparison, Fonterra collects about 18 billion litres of milk in New Zealand each milking season.