Dairy farmers in Westland and Canterbury who supply Westland Milk Products can expect a drop in their income this year.
The dairy co-operative - the second biggest in New Zealand after Fonterra - has reduced its budgeted payout by 70c per kilogram of milk solids.
Chief executive Rod Quin says the reduction to between $5 and $5.40 is due to international prices for dairy products being 10-15% less than expected.
He says the ongoing high rate of the New Zealand dollar, especially against the US dollar, has compounded the situation, and highlights the importance of the co-operative's strategy of turning significant volumes of milk into specialist nutritional products.
Mr Quin says Westland Milk Products suppliers will bear the brunt of the reduced payout, but a drop in dairy farmers' incomes will also have an impact on others in their communities.