The ANZ Commodity Price Index, published on Thursday, slumped 4.9 per cent in September, and showed international dairy prices falling 7.9 per cent.
Fonterra, the world's biggest dairy exporter, also reported a 10 per cent fall in milk powder prices at its latest internet auction as financial market turmoil and an economic slowdown hit demand.
The dairy giant said the average selling price for whole milk powder for December delivery was $US2865 per tonne, the third consecutive monthly fall in prices.
It said the global financial crisis and slowdown was curbing demand, while there was also an increase in supply.
Kaimai Cheese Company chairman Wyatt Creech said he expected the cost of Kaimai cheese to fall, reflecting market prices.
He also said Fonterra should drop its prices for dairy products, but suspected the company would try to ignore the falls if it could, The New Zealand Herald reported on Friday.
The fall in price related to milk powder, not cheese, and while the two were related, international price falls in cheese were not as great.
"It will mean a fall in the price of liquid milk: I expect the other dairy products will follow."
Westpac economist Doug Steel said although the price of dairy products was likely to fall in New Zealand, the international price slump was not good news for the country.
Despite the slump, prices were well above what they had been in previous years, and were still a good platform for economic growth and a good source of cash flow coming into the country, he said.
