The GDT price index dropped 2.6% to US$4047 a tonne, from US$4124 a tonne two weeks ago, the fifth straight decline and the lowest price since February 2013.
Some 36,549 tonnes of product was sold, down from 39,653 tonnes two weeks ago.
In February, Fonterra raised its forecast payout to farmers to a record $8.65 a kilogram of milksolids (MS) for the 2013-14 season.
It said then the company used its discretion not to raise the forecast by the further 70 cents implied by the manual used to calculate the Farmgate Milk Price.
Since then, the GDT price index has dropped almost 20%.
In March, Fonterra forecast New Zealand milk volumes would rise 7.5% to 1.57 million kg MS this season.
“The record dairy price run has come to an end,” ASB chief economist Nick Tuffley said.
“This season's boost (in volume) is coming from the incentive that Fonterra's $8.65 milk price forecast is giving to farmers to crank the handle on production.
Not surprisingly, prices have fallen in response to strong production.”
ASB is now expecting the milk payout this season to recede back to $8.50/kg MS.
In the latest GDT auction, whole milk powder fell 1.6% to US$3990 a tonne. Rennet casein fell 4.3% to US$10,630 a tonne while cheddar fell 3.3% to US$4273 a tonne.
Skim milk powder dropped 4.4% to US$3969 a tonne and butter declined 4.9% to US$3832 a tonne.
Butter milk powder fell 8.6% to US$4075 a tonne and milk protein concentrate declined 7% to US$7824 a tonne.
Lactose wasn't offered at the event.
The NZ dollar was trading at 86.43 US cents immediately before the 2:50am release.
It dropped as low as 86.24 cents but has since recovered and was recently trading at 86.40 cents.
There were 148 winning bidders out of 199 participating bidders at the auction over 12 rounds.
The number of qualified bidders rose to 764 from 756 at the last auction.
