Bay of Plenty dairy farmers are hoping a drop in international dairy prices won't mean a fall in their returns.

Overnight the GlobalDairyTrade auction experienced a 3.1 per cent drop to the lowest auction price in five years.

The drop in international dairy prices has local farmers worried.

Pukehina dairy farmer Derek Spratt says the drop wasn't expected but reinforces that dairy farmers have to be careful with their spending.

'The results from the auction are surprising and totally different from last year when prices were high,” he says.

'The major players in the international milk powder trade, China and Russia, don't appear to be buying in big volumes, and milk production is up in New Zealand, Australia and other countries, all of which is affecting returns.”

Farmers will be anxiously awaiting the next Fonterra pay-out forecast in December. 'I'm not convinced it won't go down,” adds Derek. 'I hope it won't. Some of what happens will depend on what the dollar does.”

Another Japanese recession has affected the strength of the New Zealand dollar, which could also impact on returns for NZ dairy farmers, he says.

Federated Farmers Dairy chair Andrew Hoggard says the drop in prices from the GlobalDairyTrade auction will be a huge disappointment to New Zealand's dairy farmers.

'It goes without saying that the lowest auction price in five years is going to be a blow to the industry,” he says.

'Dairy farmers were hoping to see a lift or at least a plateau to realise Fonterra's $5.30 forecast in December. So this further drop increases the uncertainty of how realistic that goal is.

'It's interesting to note that the Prime Minister said at our National Council meeting he believes the GDT has bottomed out and we are likely to see things improve going forward.

'We will wait with anticipation for Fonterra's board meeting in December when they will review the pay-out, but there'll be another GDT before then so who knows?”