Dairy co-operative Fonterra has cut its forecast milk price for the second time in two weeks after prices slumped in the latest dairy auction.

The co-op further narrowed its season forecast for the coming season from $6.25 -$7.75 per kilogram of milk solids (kgMS) with a midpoint of $7 per kgMS, to $6.00-$7.50 per kgMS with a midpoint of $6.75 per kgMS.

Dairy prices fell to near five-year lows at this week's global dairy trade auction, with the price of whole milk powder, a strong indicator of the farmer payout, falling 10.9 per cent.

Fonterra had slashed its milk payout forecast by 12 per cent on August 4, on the back of weak demand from China.

Chief executive Miles Hurrell says global dairy prices have continued to slide since then, prompting the co-op to shave another 25 cents off its midpoint.

"GDT prices have fallen sharply since we released our opening forecast for the season in May, with the overall index down 16 per cent over that period.

"While our wide forecast range assumed movement in GDT prices, whole milk powder prices fell 10.9 per cent in the most recent trading event requiring us to revise our position again."

Reduced demand from key importing regions for whole milk powder was weighing on prices, says Hurrell.

"While indications are demand will start to return over the second half of FY24, we do expect the pace of demand growth to be subdued relative to initial expectations."

The co-op will continue to respond to market signals and adjust the milk price as necessary to ensure the impact of current prices and currency movements was transparent, says Hurrell.

"This is a challenging time for New Zealand's dairy farmers and the co-op is doing all it can to support its farmers."

-RNZ.