Updated 10.25am: There's been another fall in the overnight global dairy auction, with dairy prices down 9.3%.

LISTEN ABOVE: Dairy economist Mary Ledman joins Rachel Smalley on KPMG Early Edition to discuss the drop.

Federated Farmers dairy spokesman Andrew Hoggard said they're being told things will get worse, before they get better.

"Everyone is looking at the season that's just started, as being one where if it lifts we'll be okay, but now it's looking like it will be worse than last season."

Fonterra's board is due to meet on Friday to review the farm-gate milk price for the coming season.

It currently sits at $5.25 per kilo of milksolids.

Some analysts are picking it will fall below four dollars - with a few suggesting it might even plummet to the high threes.

The estimated break-even point for farmers is put at $5.70 per kilo.

Both Labour and the Greens say the record low price show the Government has failed in diversifying the economy and to add value to exports.

Both parties are criticising what they see as too much focus from the Government on commodities.

JMIS director Andrew Kelleher told Rachel Smalley it's the second bad year in a row.

"The industry will run through that, it is a long term industry, but two bad seasons in a row puts a heck of a lot of pressure on it."

The European markets are holding New Zealand's dairy exports to ransom say economists.

Economists confirm the dairy industry downturn is not part of the normal ebb and flow of market demand.

ANZ's Commodity Price Index fell 11.2% for July - the fourth consecutive fall and the largest monthly decline ever.

Increased competition in the European market is driving milk prices further down and Agri Economist Con Williams warns increased competition in the European market is driving milk prices further down.

"Output of milk is an example, but also other soft commodities can be maintained at lower price points by our competitors."

The current prices are not sustainable for producers and exporters. As Mr Williams points out "something needs to change. That's normally going to be a lower milk supply to help a turnaround on pricing."

Mr Williams reports politics and regulation changes off-shore are structural shifts which could change the demand for NZ dairy indefinitely. Russia - once the second largest dairy importer in the world - no longer want New Zealand dairy.

"They're pretty much driving towards self-sufficiency so they're going to continue to extend trade sanctions against those thirty odd countries that they banned in August last year."

ANZ agri economist Con Williams said increased competition in the European market is driving milk prices further down.

He thinks the current prices aren't sustainable for producers and exporters.

"So something needs to change, that's normally going to be a lower milk supply to help turn around pricing."
Meanwhile in Britain, dairy farmers are being so stung by the global drop in milk prices that they've taken to supermarkets in protest.

They're stripping milk from shelves, saying they're not being paid enough to cover the costs of production.

Farmer Michael Oakes says they're constantly looking for a glimmer of light and hoping the market turns the other way, but there's a risk they'll have to sell their herds.

"It isn't going to be that long. You literally are worse of at the end of this week, the end of this month, and you can't do that forever."