Grocery food prices, the biggest component of the index, declined 0.8% after rising 0.2% in September.
Fresh milk prices dropped 5.7% to $3.13 for two litres of blue-top milk, the lowest level since January 2008, consumer prices manager Matt Haigh said.
The October fall in fresh milk prices came after Fonterra slashed its forecast payout to farmers for the 2015-16 season amid a slump in global dairy prices.
Dairy product prices fell in the latest GlobalDairyTrade auction at the beginning of November, a second straight decline, as ample worldwide supply subdued the outlook.
Chicken and lamb were also cheaper over October, dragging down the cost of meat, poultry and fish by 1.7%, though these lower prices were partly offset by more expensive pork and beef.
Beef prices are at an all-time high, with blade and porterhouse steak prices both rising while mince fell slightly.
Fruit and vegetable prices fell 5.2% in October, with seasonally lower prices for tomatoes, lettuce and courgettes dragging actual vegetable prices lower by 8.3%.
However, seasonal adjustment and higher prices for potatoes saw adjusted vegetable prices up 0.9%.
Sauces and snack food prices fell, while prices for cakes and biscuits rose.
Over the year, grocery food prices have decreased 3.4%, with dairy and meat excluding beef leading the index lower.
Fruit and vegetable prices increased 3.1% over the year, led by higher prices for potatoes, avocados, cucumber and cabbage, but partly offset by a 21% drop in the price of tomatoes to $5.69 per kilogram in October.
Food prices account for about a fifth of the broader consumers price index, which rose 0.3% in the three months ended September 30, less than the Reserve Bank's 1-3% target range.
Meanwhile, the non-tradable component, which covers domestic goods and services, was zero in the quarter, the lowest level since March 2001.
