The latest drop in Fonterra's forecast payout is a further blow to farmers, heightening concerns about not only their incomes but also their personal welfare, says Steve Bailey Federated Farmers' Bay of Plenty Dairy chairperson.

'We are urging farmers not to bottle up their concerns but to talk about them. Keep talking to their bank managers and when they can, take time out from the farm.”

Steve Bailey is urging farmers to talk about their concerns and take time out from the farm.

Last week, Fonterra announced a drop in its farmgate milk price for the 2015/16 season from $4.60 per kgMS to $4.15 per kgMS.

That figure is well below the cost of production for many farmers and has potential economic ramifications for not just farmers and their staff but for employment and businesses in the provinces too.

'The payout is now back to what it was 20 years ago but the cost of production has ballooned over that time.”

On current figures Steve says his own farming business will earn half of what it did last year, and last year's income was also down on previous years.

'This current drop in forecasted income could be the final straw for some farmers, but others will get through it. As an industry, we will get through this but it won't be easy. As an industry we are used to volatility but farmers are in for a tough winter.

'The silver lining is that we have had an amazing January in the Bay as far as rainfall and pasture growth has gone.”

While there are some things farmers can cut back on, animal welfare isn't one and feeding, milking and caring for stock is an absolute priority. 'But farmers must also look after themselves and their families.”

Steve worries some farmers don't fully understand their financial situations until they realise the cost of the bills coming in is more than their income.

'I'm also concerned that too many decisions are being made based on emotion, often fueled by what people read and hear in the media. There's no room for emotion in business, Decision have to be based on cold hard facts – including is there enough money to pay the bills?

'If you are worried and stressed, talk about it. It's not a sign of weakness but a sign of strength to do so, and its helps.”

Steve says it's easy to blame Fonterra for the drop in price but much of what is driving the price down is beyond the company's control. The biggest factors are a world-wide over-supply of milk and international tensions, including embargoes which have encouraged Russia to increase its dairy industry and the huge growth in China's agricultural sector.

New Zealand's milk production has risen dramatically too, fueled partly by the record payout of 2010/2011 and what Steve describes as 'speculator farms” where land is being converted to dairying.

'Unlike dairy companies such as Tautua which has a moratorium on its supply and can pick and choose which farms it collects from, under regulations, Fonterra must collect all the milk from every farmer who wants to supply it.”

The Dairy Industry Restructuring Act known as DIRA was brought in to ensure there was competition within New Zealand when Fonterra was formed, but Steve believes there is now sufficient domestic competition and regulators should carefully look at the legislation and how it is impacting on Fonterra farmers.

Farmers are also facing increasing costs of compliance and around environmental issues, which, while important, don't add it their income.

'We just hope that decision makers in central government truly understand what is happening on farms and are making decisions which will not make the situation worse for farmers.”

Rural Support Bay of Plenty has a website and phone number with people willing to listen and offer assistance: go to http://bayofplenty.rural-support.org.nz/ or phone 0800 787 254.