Shares in PGG Wrightson slumped on Wednesday by almost 7% after an earnings warning was issued.
The rural services company says the slowdown in dairy sales due to the global downturn will hit operating earnings, which it now expects to be between $30 million and $32 million for the June year.
That is significantly lower than its previous forecast of between $36 million and $42 million.
PGG Wrightson says the fall in Fonterra's forecast dairy payout has dampened spending by farmers. Though sheep and beef prices have improved that is not translated into greater expenditure either, due to poor returns in past years.
The company says it is meeting its banking agreements.
Shares in the company fell 8 cents on Wednesday to $1.12.