The fortnightly, overnight GlobalDairyTrade auction rose 1.7% overall to $US2975 ($NZ4065) per tonne, much less than the 5% to 10% gain anticipated by futures traders and far short of the $US3500 required for the majority of dairy farmers to break even.
Commentators highlighted ongoing concerns about currency issues, domestic production volumes and prices of the key whole milk powder component.
Fonterra is delivering its full-year financial report today. It is being tipped by analysts to reveal a big rise in profits, with after-tax profit up more than 60% to about $800 million.
A low farmgate milk price boosts margins of Fonterra's value-added products.
Fonterra chairman John Wilson said while there had been some improvement in the auction prices recently, the heightened strength of the New Zealand dollar against its US counterpart was offsetting some of those gains.
''There is still volatility in global dairy markets and we will continue to keep our forecast updated for our farmers over the coming months,'' Mr Wilson said.
He said when the forecast farmgate milk price was combined with the forecast earnings per share range for the 2017 financial year, of 50c to 60c, the total payout available to farmers in the current season was forecast to be $5.75 to $5.85, before retentions.
Westpac's acting chief economist, Anne Boniface, said while prices ''nudged a little higher'' at the auction by 1.7%, the whole milk powder prices were flat, being down 0.2%.
''The stabilisation in whole milk powder prices comes after a 34% lift in prices over the previous four auctions,'' she said in a statement.
While the result was ''broadly in line'' with expectations, the key assumption underpinning Westpac's $5 farmgate milk price forecast remained that there would be a partial retracement of the recent big run-up in whole milk prices in the coming months.
If whole milk prices did not fall, Mrs Boniface said there was an increasing likelihood Westpac's $5 farmgate milk price forecast would rise.
The biggest gains in the overnight auction were in cheddar and butter milk powder prices.
However, the 0.2% fall for whole milk powder, New Zealand's key export commodity, was a disappointment after the futures market indicated it would climb by up to 12%.
Mr Wilson said since Fonterra last reviewed its forecast milk price in August, global milk supply had continued to reduce and demand had remained stable.
''Milk production in key dairying regions globally is reducing in response to low milk prices,'' he said.
Milk production in the European Union for 2016 was beginning to flatten out and New Zealand's milk collection was at present more than 3% lower than this time last season.
Mrs Boniface said the domestic production season had reportedly started well in many parts of the country.
''And with a seasonal lift in production now occurring, we will be watching production volumes closely,'' she said.
With global milk production now falling and New Zealand farmers likely to be more reliant on pasture growth this season as they look to rein in costs, much would depend on how the New Zealand production season progressed in the next few months, she said.
- Additional reporting BusinessDesk