Dairy prices nudged down a fraction at the latest Global Dairy Trade (GDT) auction by an average 0.6 per cent across all products to reach US$3593 a tonne.
For the first time this year the price of whole milk powder fell - by 0.8 per cent to US$3232 a tonne.
New Zealand ASB analyst Nathan Penny said the drop in prices was expected, with milk futures indicating a decline of about 2 per cent.
This result was consistent with the ASB's 2017-18 NZ farmgate forecast of $NZ6.50 per kilogram of milksolids.
Fonterra's forecast is $NZ6.40/kgMS, but this is expected to be reviewed in several weeks at the same time the half year results are announced.
Milk fat prices were a touch weaker, with butter and anhydrous milk fat (AMF) prices falling 1 per cent and 3.2 per cent respectively.
Skim milk prices (SMP) prices bucked the trend, lifting 5.5 per cent, while cheddar and casein also posted gains.
"The biggest auction surprise was the jump in SMP prices," Mr Penny said.
"When we weight the auction results on a milk price basis, prices actually posted a small lift.
"From here, we expect prices to ease further through to the end of the season.
"We expect New Zealand production to improve on the back of the increased rainfall. In turn, this improved production should put modest downward pressure on prices."
United States analyst HighGround Dairy described the difference in price between the UHT grade of SMP and the medium heat grade of SMP as "an almost unfathomable spread".
The former fetched US$3220 per tonne, while the latter was only US$1905, a premium of US$1315.
"Reasons for that result are either multiple buyers desperate to obtain that specific Fonterra spec or a technical glitch," HighGround said.
While SMP is running a bit short in New Zealand, but there is plenty of stock elsewhere in the world.
AgriHQ said Fonterra had increased its WMP offer volumes ahead of the latest auction as milk flows started to improve, so buyers were unlikely to feel as much urgency to secure product.
"Cheddar prices lifted 1.7 per cent, driven by some short-term demand, as only the price for product to ship in April and May lifted," AgriHQ said.
"Cheddar prices are expected to bounce around similar levels for now.
"Both Europe and the US have plenty of cheese available and have been competing strongly on the global market."
There were 130 winning bidders at this event and 19,292 tonnes of product sold.