The continuing bad news about their payout is like a 'death by a thousand cuts” for many dairy farmers, says Bay of Plenty Federated Farmers' dairy spokesman Steve Bailey.

'Fonterra's latest forecast of $3.90 per KgMS is a bitter pill to swallow and while some farmers may still be making money at this level, for others it could be straw that breaks the camel's back.”

Fonterra Co-operative Group Limited today reduced its forecast farmgate milk price for the 2015/16 season from $4.15 per kgMS to $3.90 per kgMS.

When combined with the forecast earnings per share range of 45-55 cents, this means a total forecast available for payout of $4.35-$4.45 per kgMS and would currently equate to a forecast cash payout of $4.25-$4.30 per kgMS for a fully shared-up farmer after retentions.

Fonterra is also forecasting its New Zealand milk production to be at least four per cent lower than last season, as New Zealand farmers respond to the ongoing low prices by reducing herd size and feeding significantly less supplementary feed which is expected to have an impact on this autumn's production.

Steve says the payout drop was not completely unexpected and in fact, many banks had been predicting an even lower payout, advising farmers to budget on less.

'We all know what the problem is but now have to work to find solutions.

'Billions of dollars are invested in the farming sector including by banks and they will not let farmers fall over. Farmers will fight as hard as they can to stay farming. You don't go into farming short term. We are in this business for the long haul.”

Steve urges anyone feeling under pressure because of the current situation to call the Rural Support Trust on phone 0800 787 254 for help. 'You are not alone, help is available.”

However, Steve says farmers will have to re-address their farming systems and carefully consider every aspect of their costs, including staff, supplementary feeds and how to manage animal health.

'The reduced payout will impact on other businesses which offer extra services and technology to farmers. We have some excellent technology to assist farming but I wonder if farmers can afford to continue to use them.

'Farmers need to work with their banks and accountants, use the resources of DairyNZ and talk to fellow farmers to help get through.” Bay of Plenty dairy farmers have been fortunate that the grass has kept growing this summer but that's not the case for farmers in other parts of the country.

'They are facing not only reduced grass growth but also reduced payout.”

No all New Zealand's dairy farmers supply Fonterra, and Steve says it will be interesting to see the forecasts from other milk companies.

However, Fonterra is the nation's biggest milk company and reduced returns to its farmers will once again have an impact on regional and the national economies.

Fonterra Shareholders' Council Chairman, Duncan Coull, says today's announcement of a further 25 cent drop in the 2015/16 payout, coming so close on the heels of January's 45 cent milk price reduction, will magnify the effects on farmers' businesses.

'Farmers understand what the market realities are and continue to make adjustments where they can.

'This news is difficult for us to hear and for our co-op to give however, that it was provided in a timely manner at least lets us know exactly where we are placed and enables us to prepare accordingly.

'Farmers now need their co-op to drive the business hard, execute strategy, and deliver cash to them. In essence, farmers want to see the full benefits that the co-operative model offers and we will all be watching March's interim results with great interest.

'This current environment is no doubt placing added personal stress on farm so it's imperative we keep in touch with our neighbours, friends and families, and all support each other where we can.

'I also ask that farmers stay connected with their co-op and contact their local shareholders' councillor if they have any questions, need advice, direction or support,” says Duncan.

Fonterra chairman John Wilson says difficult conditions in the globally traded dairy market have put further pressure on the forecast.

'This further reduction in the forecast Farmgate Milk Price is the last thing farmers want to hear in what is proving to be a very challenging season. At times like this the business needs to do everything it can to drive every last cent back to farmers.

'Management is fully focused on reducing cost and generating cash right across the business. The continuing lift in financial performance and our balance sheet strength will provide opportunities to support our farmers' cash flows. We will provide an update on this at our interim results on March 23,” says John.

Fonterra chief executive Theo Spierings says dairy exports and imports had been imbalanced for the past 18 months due to European production increasing more than expected, and lower imports into China and Russia – the two largest importers of dairy.

'The time frame for a rebalancing has moved out and largely depends on production reducing – particularly in Europe - in response to these unsustainably low global dairy prices.

'The long-term fundamentals for dairy are positive with demand increasing at over two per cent a year due to the growing world population, increasing middle classes in Asia, urbanisation and favourable demographics.

'Our forecast is based on no significant changes to either supply or demand globally before the end of the year. However, a reduction in the supply available for export before then could mean prices recover earlier than currently expected.”