Dairy giant Fonterra will reduce its domestic milk price from the end of the month and the savings look likely to be passed on to consumers at supermarkets.

In February 2011, Fonterra froze the wholesale milk price for New Zealand for the remainder of the year after a public outcry that an essential item was being priced out of reach of ordinary Kiwis.

Fonterra said the freeze was to shield New Zealanders from any big increases in international price which it was able to do, and on Monday a spokeswoman said the company's milk price for the domestic market would fall soon.

"Fonterra Brands New Zealand has notified retailers that there will be a reduction in wholesale milk price effective January 30. International dairy prices have softened since the highs of earlier last year," the spokesperson said.


"While they are on the rise again, we would expect to see local prices come down slightly," the spokeswoman said.

Fonterra said it was ultimately up to retailers to set the price of milk for consumers.

Details on the wholesale price drop and how long it would be down for were still being worked out.

The doubling of international dairy prices in the last 18 months has pushed domestic milk prices up and consumption down.

Traditionally, milk consumption in New Zealand increased 1-2 per cent annually but high prices have led to a decrease by a similar rate.

Last month Fonterra announced it would reintroduce school milk, starting with a pilot in Northland school.

Foodstuffs, which runs Pak N Save, 4 Square and New World supermarkets, welcomed Fonterra's move to reset the local price of milk.

Managing director Steve Anderson said milk prices had been a hot topic the past year and he appreciated that it had been difficult for many Kiwis to keep milk on their shopping list.


"We have always worked with suppliers to bring the best possible prices to our customers. We are pleased to hear that Fonterra are planning to reset milk prices within New Zealand, and we are looking forward to passing any savings directly to our customers."

Luke Schepen, spokesman for Progressive Enterprises, which runs Countdown supermarkets, said the company would to wait to see what Fonterra's new price was before deciding what saving it could pass on to customers. He said the company was always looking to pass on savings.