The Global Dairy Trade index fell at Tuesday night's auction but pundits are not expecting the trend to continue.
The GDT index was down 0.5 per cent, ending a run of increases since mid-September.
Fats led the fall with the anhydrous milk fat index down 5.1pc and the butter index down 4.9pc.
But all other indexes posted gains with the whole milk powder index up 0.5pc and the skim milk powder index up 1.9pc.
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New Zealand bank ABS's senior rural economist Nathan Penny said the bank anticipated prices would lift again in coming months.
He pointed to the WMP price, which was up 25.1pc on the same time last year.
Fat prices were nearing their seasonal lows, but were still higher than 12 months ago,
"Looking ahead, we suspect that auction prices may lift once again after the pause overnight," he said.
Westpac head of NZ strategy Imre Speizer said Chinese demand remained solid at the auction and had been the main source of growth for New Zealand's dairy exports this year.
"Solid demand, combined with contained supply (NZ affected by a cooler-than-normal spring; international producers flat in annual growth terms, although the European Union and United States have picked up recently), suggests the near-term price outlook remains positive," he said.
Mr Penny also pointed to intensifying production weakness in NZ during November, as well as soft production growth in the northern hemisphere.
"In short, production growth in the key dairy exporters is insufficient to meet growth in global demand," he said.
Australian production continues to decline
Australian milk production is also weak, with the latest figures from Dairy Australia revealing a continuing decline in production.
Nationally production was down 5.5pc for October compared with October 2018, while year-to-date production was down 5.8pc.
Drought-ravaged Queensland, down 14.9pc in October, and NSW, down 8.0pc, led the fall, with South Australia, which had grown last year at this time, also down (10.3pc) and Western Australia down 4.4pc.
Victorian production overall was down 5.5pc but this masked major regional differences with Gippsland production up 2.3pc, while western Victoria was down 10.2pc and northern Victoria was down 9.1pc.
Tasmania is the only state showing any signs of growth - up 1.6pc for October but still down 1pc for the year.
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