The GDT price index dropped 8.9% to US$4124 a tonne from US$4563 a tonne two weeks ago, the fourth straight decline and the lowest price since August 2012.
About 39,653 tonnes of product was sold, up from 39,008 tonnes two weeks ago.
Soaring prices of global dairy products helped Fonterra lift sales in its first half by 21%, including record shipments to China in December.
Profit tumbled 53% as the high price of milk, which was based on reference products including milk powder, drove up its input costs for products such as casein and cheese.
The company said last month it did not predict any let-up in the second half because factory constraints had led to an unfavourable product mix.
In the latest auction, rennet casein rose 5.5% to US$11,105 a tonne while cheddar fell 3.5% to US$4438 a tonne.
Whole milk powder, the biggest product sold by volume, fell 8.4% to US$4033, its biggest decline since May last year.
Skim milk powder prices dropped 9.6% to US$4126 a tonne and butter declined 11% to US$4040 a tonne.
Butter milk powder prices tumbled 15% to US$4211 a tonne and milk protein concentrate declined 4.3% to US$8436 a tonne.
Lactose wasn't offered at the event.
There were 167 winning bidders out of 201 participating bidders at the auction over 11 rounds.
The number of qualified bidders rose to 756 from 747 at the last auction.
