Dairy has led the way in a month of falling commodity prices according to the ANZ Commodity Price Index for July.

Whole Milk Powder dropped 12.6% and skim milk powder 2.7%.

The decline comes after Fonterra’s online global dairy trade auction reported a 15% slump in whole milk powder.

ANZ economist Steve Edwards says the sluggish dairy numbers have far-reaching consequences.

“Dairying and dairy prices make up close to 40% of our commodity index so it’s a main driver of where the index is over time.

"Although there are some commodities that have been recording healthy rises, such as skins, wool and kiwifruit, the main catalyst has been the fall in the price of dairy, and it’s driven the index down for the second month in a row.”

On the other side of the ledger, skins jumped by more than 10% in July, and seafood, kiwifruit and wool followed suit.

Overall the CPI dropped 0.8% for the month.