The industry body, DairyNZ, is painting a grim picture for dairy farmers over the next year.
Dairy cow. Photo: SUPPLIED
It predicts most dairy farmers will be running at a loss for much of the next 12 months, and going deeper into debt , following Fonterra's announcement of a further fall in this season's forecast milk price and a low opening milk price for the new season, starting next week.
Fonterra has dropped its already low payout for the current season by a further 10 cents to $4.40 a kilo of milk solids, and declared an opening forecast for the 2015-16 season of $5.25 a kilo.
DairyNZ's chief executive Tim Mackle said based on that, the average dairy farmer's income for the next season is going to fall well short of the break-even milk price - $5.70 - it has calculated.
"So, if the $5.25 that's been announced as a forecast - and it's early days yet - does come to fruition next year, then the reality is that the average net milk income that farmers receive will be lower than that. We think it will possibly be around the $4.75 mark," he said.
"That's because every year, income is shifted forward, if you like, from the previous year's milk price and that's called retrospective payments. Now these retro payments that are due in 2015-16 will be significantly less than what farmers have received in the current year.
"So, a combination of that and the fact that some of the income from next year will shift forward to the following year, means that we're picking around $4.75.
Mr Mackle said Fonterra's scheduled advance milk payments to December will be the lowest for that period since 2006-07.
"If the average break-even milk price is, we're picking, around $5.70, by the time you've had your farm working expenses, interest and rent, and tax, and of course drawings to live on, there's quite a big gap, and on average it's almost a dollar."
DairyNZ is calculating that the average farmer's milk income for the next season will drop by $150,000.
In response, it is ramping up its support to dairy farmers by boosting the Tactics for Tight Times campaign it has been running.
