This follows speculation that the main buyers at the event would hand back their option milk following the significant drop in powder prices registered at an international 'internet sale' hosted by the New Zealand dairy giant Fonterra some seven days ago.
"The sale represented the first of the new season milk from the southern hemisphere," added Trevor Lockhart.
"The returns from whole milk powder at the Fonterra auction fell by £200 to £300 per tonne, which is equivalent to 2 to 3 pence per litre."
He continued: "Fane Valley has already secured approximately two thirds of its milk requirements for the month ahead," he added.
"However, the decision has been taken by the board to retain our full allocation of option milk in advance of next week's auction.
"Milk at the previous two auctions was purchased at prices in excess of 26 pence per litre. Given the downturn in world markets, this means that we will be processing September milk at a loss.
"If commercial factors were the only consideration, then rejection of option milk would have been a real possibility.
"However, we recognise that local dairy farmers are coming into the period of highest production costs and the board's decision takes account of these circumstances."
But the Fane Valley chief executive also recognises that should this weakness in world dairy markets persist, the position regarding option milk in future months will be reviewed.
"We are monitoring the situation on a regular basis," he stressed.
"It is very hard to predict how dairy markets will perform over the coming weeks and months. The situation is very volatile at the present time."
Last week's Fonterra sale was the second internet sale of its kind hosted by the New Zealand co-op. And there is now growing concern that it is not serving best purpose in terms of securing the strongest possible price for dairy commodities."