More profit appears to be on the horizon for dairy farmers, with conditions faring better than expected.

Dairy NZ's lifted its revenue forecast to $8.84 per kilogram of milk solids, with a break even of $8.09.

Head of Economics Mark Storey says the combination of improved farmgate milk prices and declining interest rates show a healthier situation for the sector.

But he says the costs of electricity, feed, and maintenance have kept driving farm working expenses up.

He says overall expenses are staying stubbornly high, so the inflation hasn't come out of the system just yet.

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