Fonterra is increasing the price of its milk.

Prepare to pay more for milk and cream in the New Year as dairy giant Fonterra increases its prices.

Customers have received letters from milk suppliers saying Fonterra had advised them "due to global demand, pricing across the range of fresh milk, flavoured milk and UHT products will increase by 9.1 cents a litre and fresh cream by 41.4 cents a litre, effective January 2".

They sent the letters on to the media, outlining their concerns.

"Massive profits yet Fonterra still increase milk prices to everyday New Zealanders - no wonder fizzy drinks are the norm for our kids as the prices never increases," one customer, who did not want to be named said.

READ MORE: What is Fonterra anyway?



The dairy giant confirmed the imminent price hike on Tuesday but would not say how long the price would last or if they would move higher.

"Dairy commodity prices have risen significantly in the last six months and while we try to absorb these fluctuations as far as possible, we're having to make a wholesale price increase to our customers," Fonterra said in a statement.

"Some of the factors that have impacted the global price of milk in the last 12 months are: weather, changes in milk quotas in Europe and instability in some countries."

Supermarkets said their profit margins on milk would not increase as a result of Fonterra's price rise. They work with supplier regularly on shelf prices.

Countdown online shopping currently shows 1 litre of Fonterra's Anchor milk selling at $2.69 and 500ml of Anchor cream retailing for $3.79.

Fonterra Brands - the division which produces milk products for the New Zealand market - buys milk from its parent company Fonterra. So if the prices Fonterra sells its milk at during the fortnightly GlobalDairy Trade (GDT) auctions increase then that is reflected in the price Fonterra Brands pays.

In early December, world dairy prices rose for the fourth time in a row, taking the GDT index to its highest point since June 2014.

Previously, industry players have said it takes about three months for changes in the price of milk powder to flow through to the consumer price.

Fonterra reported a profit of $834 million in September, a jump of 65 per cent, but the price of milk in shops is linked to global dairy prices, which are set by international trading.

Food prices released on Tuesday by Statistics New Zealand showed an increase for the year to November 30, of 0.6 per cent, reflecting higher prices for vegetables, dairy, and ready-to-eat-food.

"Fresh milk prices rose 6.1 percent in the year, to an average price of $3.33 for two litres of blue-top milk," consumer prices manager Matt Haigh said.

"This is the highest annual increase in milk prices since November 2014, when the average price was $3.71."

Fonterra and its shareholders produce more than two million tonnes of dairy ingredients, specialty ingredients and consumer products every year.

Only about 5 per cent is kept in New Zealand. It produces about a third of the world's dairy exports.