The auction, which is run by New Zealand’s largest dairy exporter, Fonterra, comes on the back of a 2.2% decrease in prices at the last trading event. This is the sixth successive decline in prices.

Prices for all dairy commodities fell at the auction. Whole Milk Powder (WMP) fell by 3.1% to $2,309. WMP, which is New Zealand's most important dairy product, declined 0.5% at the last auction on 19 May. Skim Milk Powder (SMP) dropped 1.3% to $1,982.

Butter suffered the highest loss at 10% to $2,619, while butter milk powder fell 7% to $1,795 after a rise of 3.2% at the last auction.

There were 148 participants at the auction, with 27,711 metric tonnes of product sold.

Drop in income

Meanwhile, the average New Zealand dairy farmer’s income is expected to drop by $150,000 next season according to DairyNZ.

The organisation, which represents all New Zealand dairy farmers, calculated that the breakeven milk price for the average farmer is $5.70kgMS, however the forecast projects a milk price of $4.75.

The chief executive, Tim Mackle, said “this will be the lowest milk payment farmers will get until Christmas since 2006-07. This is going to be a challenging season for a lot of farmers but it’s also an opportunity to strengthen the resilience of our industry if we can use it to become more efficient in how we farm.”

The graph below shows the closing monthly bank balance for an average farm in the 2015-16 season with the assumption it starts at zero dollars.

Low prices will not come as a shock to many dairy farmers in New Zealand. DairyNZ offer a Tactics for Tight Times campaign that will offer seasonal advice to farmers helping them to make the most cost efficient gains on farm.

“It can be hard to think straight and make good decisions if you are under stress and pressure. We’ll be bringing all our industry together - the rural support trusts, the banks, the Dairy Women’s Network and others - to ensure this is a co-ordinated effort. We need an industry safety net around our farmers to look after their mental wellbeing too,” said Mackle.