(Updates with more details on outlook, industry context)
WELLINGTON, Nov 29 (Reuters) - New Zealand's Synlait Milk SML.NZ said on Tuesday it has increased its forecast payout to farmers by 20 percent to NZ$6.00 per kilogram of milk solids (kgMS) for the 2016/17 season, helped by slowing supply.
"We've kept a close eye on the global dairy market and the trending increase in dairy prices can't be ignored," Chairman Graeme Milne said in a statement.
Tightened global milk supply and ongoing demand for dairy products has led to a 50 percent rebound in prices since July, which is starting to filter through to farmers.
Dairy co-operative Fonterra FCG.NZ FSF.NZ earlier this month lifted its forecast farmgate milk payout to NZ$6 kgMS. rising steadily since 2008 to scale record highs in 2013, global dairy prices fell sharply because of slowing economic growth in New Zealand's top export market, China, and a global oversupply of milk products.
Milne said Chinese demand was picking up, but it was still unclear whether and for how long that might continue.
"We remain cautious about the medium to long-term outlook and encourage our milk suppliers to take this into account as they make their plans," Synlait CEO and Managing Director John Penno .
Synlait is based in New Zealand's south island, supplying to about 200 milk suppliers in the Caterbury region.