Federated Farmers is predicting that the drought will push many dairy farmers into a cash loss this season.
Dairy chair Willy Leferink is warning against making too much of the 14% price hike in this week's global dairy auction.
He says the increase is driven solely by supply and demand, with predictions that New Zealand milk production is likely to drop for the first time in five years.
In the North Island, many herds have either stopped production or are in the process of drying off early.
Mr Leferink says with spartan pasture cover and low feed reserves, it is going to be a lean winter on many farms.