The terms of trade, a gauge of the country's purchasing power, fell 4.4% but without the fall in dairy, it would have been only down 0.9%, Statistics New Zealand said.
It was the first fall in the terms of trade since the December 2012 quarter and it followed an ''exceptional run'' in which it rose for six consecutive quarters, ASB rural economist Nathan Penny said.
Dairy prices fell 11% while seasonally adjusted dairy volumes rose 1.5%. Meat prices lifted 4.3%, a reflection of surging beef prices.
It was the second consecutive fall in dairy prices, down 15% from a recent peak in the March quarter. Forestry prices fell 3.9%, influenced by lower prices for pine logs.
Import prices, down 0.1%, were flat overall. The key movement was a 5.4% fall in electrical machinery and apparatus prices, led by goods such as cellphones, televisions and cameras.
Offsetting that fall was a 2.7% rise in petroleum and petroleum product prices, led by higher prices for crude oil.
Mr Penny said the result had no implications for the bank's official cash rate view and it still expected the Reserve Bank to ''pause for an extended period'', with the next lift in the September 2015 quarter.
He expected the terms of trade to continue to decline over the fourth quarter and into 2015, although remain high by historical standards.
That reflected the bank's expectation that demand for food in emerging economies remained structurally higher, supported by continued low global inflation.
Westpac senior economist Michael Gordon said the terms of trade was a ''slightly dated picture'' of New Zealand's export performance.
Dairy product prices were set an average of three months before shipment, so the 11% price drop largely reflected the fall in world dairy prices up to June.
World prices had continued to fall sharply since then, which would take several more quarters to flow through into the terms of trade, Mr Gordon said.
This week's GlobalDairyTrade auction was likely to be the last before Fonterra updated its milk price forecast for the 2014-15 season.
It was expected to lower its current $5.30 forecast.
In the latest ASB commodity price report, Prof William Bailey, of the Department of Agriculture, Western Illinois University, said milk supplies continued to grow in both Oceania and the US, despite lower ingredient prices.
US milk production for October, reported by the United States Department of Agriculture, was almost 4% higher than for last October.
Major dairy states all reported output up on last year.
