Dairy prices will pick up, it's just a matter of when and how quickly they do, Finance Minister Bill English says.
Dairy product prices sank again in last week's GlobalDairyTrade auction, with whole milk powder leading the way with a 13.1 percent drop.
"The way it's been described to me is there's been a perfect storm of excess milk supply influenced by events in Russia, Europe and China and in New Zealand and Australia and that's led to these prices," Mr English told reporters.
Another factor in the low prices is there's more milk powder stockpiled in warehouses in China than previously thought, Mr English said.
He believes prices must be "somewhere near the bottom", but he wouldn't say when they might head on a positive track again.
"I don't think there's much doubt they're going to pick up, it's just a matter of when and how fast."
Meanwhile, Fonterra will review its forecast payout to farmers early next month.
It stands at $5.25 per kilogram of milk solids, but it is expected to drop.
Open Country Dairy, the country's second largest milk processor after Fonterra, yesterday reduced its forecast farmgate milk price to between $3.65-$3.95/kgMs.