The state-owned enterprise minister says he expects Landcorp will need to sell farms to boost its balance sheet.
The Government said it was looking closely at Landcorp's debt levels after Solid Energy's demise and the drop in dairy prices.
Landcorp is the country's largest farmer, worth about $1.6 billion, with 140 farms in its portfolio.
Todd McClay said the company's debt levels of around $250m were concerning, as its earnings were very low.
"The first six months of this year, they only made a million dollars in profit. I expect them probably to lose money during the remainder of this year, so we're a bit concerned about their debt levels, especially when one considers that in 2004, they entered into a contract for significant dairy conversions in the Waikato area, up to 2049.
"There's going to be a lot of cost around that, so we've just said to them they need to have a little look at their balance sheet. We don't want debt levels to get too high and it does mean, I think, they're going to have to look at selling a few farms, but they buy and sell farms all the time, actually."
Mr McClay says the Government would retain 100 percent ownership of Landcorp.
But the Green Party has called on the Government to disclose any financial penalties that may be imposed on Landcorp if it stopped converting land to dairying in south Waikato.
Greens water spokesperson Catherine Delahunty said the Government must tell New Zealand whether the cost of getting out of the conversions would be more than the cost to the public of cleaning up the Waikato River as a result of them.
