The co-operative announced last week that its opening forecast milk price for the 2013-2014 season would be $7/kg milk solids (MS).
Federated Farmers national dairy chairman Willy Leferink described the forecast as "morale-raising good news".
It meant farmers could get about $0.58 cents per litre for the milk they produce between June and May 2014.
"While a $7 kg/MS milk price forecast sounds amazing, the public deserve to know this is forecast revenue and revenue is not profit.
"To get to profit you need to take off the farm's working expenses, tax obligations and pay back the bank manager."
The forecast was great news for local dairy farmers, South Canterbury Federated Farmers dairy section chairman Ryan O'Sullivan said.
The benefits of a high payout would filter down through the industry to sharemilkers, farm employees and the local economy.
"At that level of payout many of those businesses would know the difference. It would be great for the local economy and those businesses which is great for jobs and prosperity."
Further north, Manawatu/Rangitikei, Federated Farmers dairy chairman James Stewart said the payout would make farmers confident in their industry.
While the new season forecast was great, of even more importance was the advance rate of $5/kg MS which farmers get immediately the new season starts.
"The advance last year was $3.85 a kg/MS, so it is up $1.15 this year. We had a hard season, with the drought and not great payout last season, so it will really help."
The forecast was welcomed by Taranaki's largest farm owner, Parininihi ki Waitotara (PKW).
"It's better than we've budgeted for so that's positive. It's welcome news coming off the back of the drought," said PKW chief executive, Dion Tuuta
He hoped Fonterra had taken a conservative approach which would allow the forecast to rise during the course of the new season.
PKW, which owns 14 Taranaki dairy farms, has a budget for the new season of 2.9million kgs MS, after finishing the current season around budget of 2.6million kg MS.
O'Sullivan said the optimism would be tempered by a degree of caution because of the volatility of forecast payouts in recent years.
He predicted many would use the lift for debt repayments rather than making major spending decisions.
"Farmers and bankers will be looking at this payout, if it does hold, as an opportunity to repay debt," he said.
Fonterra chairman John Wilson said the bumper opening milk price was not only because of strong global prices, which had risen 60 per cent in the past year, but was also possible because of Fonterra's strong balance sheet.
It was an acknowledgment that the company's 10,500 farmer shareholders had had a tough time this year.
Wilson cautioned farmers to be careful in managing their budgets around the current $5.80/kg milk price because of the significant fall in milk production.
