Fonterra's announcement came shortly after a 1.7 per cent rise in world dairy prices.

Fonterra has lifted its 2016/17 forecast farmgate milk price by 50 cents to $5.25 per kilogram of milk solids, the dairy giant said on Wednesday.

The total payout available to farmers in the current season is forecast to be $5.75 to $5.85 before retentions.

The news comes after a 1.7 per cent rise in world dairy prices at the GlobalDairyTrade auction overnight, lifting the index to an 18-month high.

- More to come