Milk giant Fonterra has announced an increase in the price it pays Tasmanian farmers for milk.

The New Zealand milk processor says international dairy prices rose nearly 14 per cent per cent at its latest milk powder auction, indicating the market is stabilising.

Fonterra's price increase to suppliers of 13 cents per kilogram of milk solids is retrospective to July the 1st this year.

The company says it means that from next week, more than 1,300 suppliers in Victoria and Tasmania will start to get an extra $15 million in total.

Chris Oldfield from the Farmers and Graziers Association says the price increases are a good sign.

"The question is are they they sustainable, and we sincerely hope so.

"We have seen a number of commodity prices turn around in recent weeks, but again in other sectors of our industry we're yet to see that.

"But when we see these signs coming out of New Zealand for dairy products, you would have to be optimistic that that will lead to some increases in Australia," said Mr Oldfield.