International dairy prices have fallen in the first GlobalDairyTrade auction of 2016.

The headline price index fell 1.6 percent, with key whole milk powder prices down more sharply, falling 4.4 percent.

Westpac Senior Economist Anne Boniface said the auction's disappointing.

She said the bank's current $4.50 farm gate milk price payout forecast for the 2015/16 season relies on an improvement in prices in the first few months of this year.

Anne Boniface said this result introduces some downside risk that forecast.

But she adds the impact of the current El Nino weather pattern could weigh on NZ milk production over the next few months, which in turn could put some temporary upward pressure on prices.

However with European milk production still growing strongly, and the Chinese economy continuing to look relatively soft, a more sustained improvement in prices looks likely to be a while away yet.