The first GlobalDairyTrade auction for New Zealand's new dairy season resulted in an overall price fall of 1.3%.
The decline this week was led by a 3.5% fall in butter prices, while whole milk powder fell 1.1%.
Prices were softer than had been expected based on futures prices before the event and might reflect firm New Zealand production over April, ASB senior rural economist Nathan Penny said.
Nationwide production - for all processors - came in 3.1% higher than in April last year. That said, April production was modest compared with other months, accounting for about 7% of annual production.
Mr Penny expected the global butter shortage to remain acute. The boost from firm April production was likely to be short-lived and the bank still expected butter and/or anhydrous milk fat prices to set fresh records over the coming months.
Westpac senior economist Anne Boniface said the bank's current milk price forecast for the new season of $6.40 was noticeably below Fonterra's opening forecast of $7.
Part of the difference in view was likely to stem from Westpac's outlook for Chinese growth. It was expecting a significant slowdown in the Chinese economy this year and next, and was sceptical the Chinese consumer would be completely unaffected by that. Consequently, it expected to see dairy prices slide further in the coming months.
The ANZ world commodity price index lifted 1.5% in May, the fifth consecutive rise in 2018, the major contributions coming from cheese, skim milk powder and lamb.
Dairy prices made a 1.5% monthly gain (or 4.7% year on year), supported by slowing global production growth across major export regions and ongoing strength in global demand, ANZ's report said.
In Europe, production was dampened by cooler weather in February and March, which kept cows indoors longer and reduced pasture development.
United States milk supply had fallen slightly below trend growth, while southern hemisphere supply had been growing steadily and demand had kept pace.