Federated Farmers says 40% of New Zealand's dairy herds are now in drought declared zones.
When dry areas such as Bay of Plenty and Otago are added, it says nearly half of dairy herds are affected.
Milk production in Northland is down about 29%, due in part to last season being a very poor one.
Production in Waikato and South Auckland is down 6.5% and 3.1% in Bay of Plenty.
With the North Island accounting for about two-thirds of total milk production, nationally milk volumes will be down about 2%.
Federated Farmers says it can take several seasons to return to full production, so farmers must make provision for pasture renewal now. It says cow condition recovery is also very important.
Without a national plan for water storage, dairy chairman Lachlan McKenzie says the cost to New Zealand is hundreds of millions of dollars in lost exports.