The price of whole milk powder - which is responsible for about 75% of New Zealand cooperative Fonterra's farmgate milk price - fell by 13.1% to US$1848 a tonne.
Fonterra's current milk price forecast of $5.25 per kilogram of milksolids for 2015/16 is based on GDT prices reaching about US$3500 a tonne towards the end of this season.
Price declines were across all but one of the products offered for sale.
Cheddar prices dropped by 13.9% to US$2,613 a tonne, skim milk powder by 10.1% to US$1,702/tonne, butter by 9.5% to US$2,460/tonne and rennet casein by 8% to US$5,430/tonne.
Butter milk powder prices dropped by 4.4% to US$1,794 a tonne and anhydrous milk fat lost 10.6 % to $2,621. The only product to gain was lactose, which firmed by 1.9% to US$549/tonne.
NZX dairy futures pricing suggested prices might fall at this morning's auction but not nearly to the same extent. The average winning price was US$2082 a tonne.
Prices, after a steep decline in 2014, bounced back in February this year but have been falling ever since.
Oversupply, slack demand from China, the world's biggest dairy importer, Russia's import ban, the removal of dairy production quotas in Europe and higher production arising from cheaper feed costs have all acted to depress dairy prices.
Economists expect prices to stay low this year before the balance between supply and demands starts to improve next year.
The Reserve Bank has flagged a weak dairy sector as one of three key risks to the nation's financial stability, saying about a quarter of farmers were operating in negative cash flow.
The bank cut its official cash rate by 25 basis points to 3.25% on June 11 and financial makets are pricing in two more cuts by the year's end.
Prices showed signs of bouncing back in February but have declined at every sale since March 17. Trade on the NZX futures suggested that wholemilk prices would decline by about 8% - not the 13.1% fall that transpired at the auction.
Domestic milk production, despite low prices, was strong in May - the last month of the 2014/15 season. According to Dairy Companies Association of NZ data, the sector produced 80.8 million kilograms of milksolids in the month, down from 138 million kg in April but up from 72.3 million kg in May 2014.
Federated Farmers said yesterday that its new-season July 2015 Farm Confidence Survey had moved further into negative territory because of further declines in dairy prices.
