Fonterra says the global recession is continuing to weigh on consumer demand, after a fall in the international price of milk powder, ending two months of increases.
The average price for whole milk powder dropped 4.1% to $US2144 per tonne in an online auction, compared to the previous auction in April.
However, prices rose by 2% for contracts with short-term delivery.
Fonterra says the result confirms its expectation that dairy markets will be uncertain, and it expects prices will remain around current levels.
The auction was scheduled to be held last week, but was postponed because of technical problems.
Last month, the company raised its payout to its farmers by 10 cents to $5.60 per kilogram of milksolids, which is still lower than the previous season's $7.90 payout.