The Global Dairy Trade (GDT) price index fell 2.4% at the latest online auction, marking the largest change in either direction since May 2017, according to the AHDB.
The index is derived from the twice-monthly GDT auction and is a key indicator of market sentiment.
At the latest event on 3 October, the price index for whole milk powder (WMP) was down by 2.7% to US$3,037 (£2,311.1/t). Skim milk powder (SMP) also dropped, recording a 1.4% fall to US$1,895 (£1,441.9/t).
Together WMP and SMP make up about 75% of the product sold. Of the other products traded only cheddar showed a marked increase in price index of 1.9% to US$4,109 (£3,127/t).
AHDB lead dairy analyst Chris Gooderham said the fall in milk powder prices reflected a drop in butter values.
“Butter has been at an extremely high figure of £6,000/t in recent times. As context, if you had asked me a year ago, I would have said £3,000/t was a high figure for butter.
“Those highs have pulled up milk powder values, so with a drop in butter prices we are seeing milk powder prices come back as well,” said Mr Gooderham.
He also stressed the importance of viewing the latest auction result with caution.
“It is extremely important not to overreact to results from a single auction market. We must look to trends as a truer reflection instead,” he warned.